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Chapters 6 & 7

Terms in this set (39)

Offering
purposely broad term that captures both tangible products and intangible services provided by firms
Offerings must by augmented by and linked to _______ and ______________ to ensure the firm's SCA, because it is generally more easy for competitors to copy offerings given enough time/money
brands and relationships
Innovation
the creation of substanial new value for customers and the form by creatively changing one or more dimensions of the business
what are the key aspects of innovation
1. broader than product or tech innovation
2. must generate new value for customer and seller
3. involves change leading to differentiation and SCA
What does short-term business pressure do to innovation?
often undermines innovation (CEOs want returns from marketing in 6-12 months, resources taken from long-term initiatives, accounting practices for market-based assets impact decisions)
What are the four different ways to innovate?
1. what (the firm offers)
2. who (the customer is)
3. how (you sell to the customer)
4. where (you sell to the customer)
Offering Equity
refers to the core value that the performance of the product/service offers the customer, absent any brand/relationship equity effects
What do new innovative offerings do?
1. motivate customers to switch (from competitors to innovative firm)
2. help the firm acquire new customers or enter new markets
3. enhance the firms brand
How do marketers contribute to offering and innovation strategies?
1. helps firm develop innovative offerings (by collecting customer input and forecasting trends)
2. responsible for launching the new offering (to customers to generate sales with acceptable profit levels)
Why do about 1 out of every 125 NPD leads to successful commercialized offering?
- failure to provide large enough perceived benefit (price vs performance, no differential advantage)
- poor product launch (slow diffusion)
- poor targeting/positioning of new product, competitive response
What are the product factors that determine the rate of diffusion?
1. relative advantage
2. compatibility
3. complexity
4. trialibility
5. observability
Relative advantage
degree to which an offering is perceived as being better than the ideas it supersedes (cost/price, status/prestige, necessary but not sufficient)
Compatability
degree to which an offering is perceived as consistent with existing values and experiences (often must break habits, perceptions, beliefs)
Complexity
degree to which an offering is perceived as relatively difficult to use/understand
Trialability
degree to which an offering may be experimented with on a limited basis (free samples/test drive/demo, especially salient for high cost/time/risky products)
Observability
degree to which the results of an offering are visible to others
Crossing the chasm
many new offerings fail to survive the jump from early adopters to the early majority groups
What psychology concepts should you consider to speed up diffusion?
- social proof
- authority
- scarcity
- prospect theory
Social proof
looking at others is a way we determine what to do (more people --> larger belief its correct, more similar people --> larger impact on behavior)
Scarcity
things seem more valuable when their availability is limited
Prospect theory
describes person's perceived value for an objective gain or loss
Endowment effect
it is more painful to give up an asset than it is pleasurable to buy it
Relationship marketing (RM)
process - namely identifying, developing, maintaining, and terminating relational exchanges to improve performance - that can produce relationship equity
Customer relationship management (CRM)
the managerially relevant, organization-wide, customer-focused application of RM, using IT to achieve performance objectives
Relationship equity
the aggregation of relational assets and liability, associated with the firm's boundary-spanning employees and social networks linked to the offering/experience, that add to or subtract from the value provided by the firm's offering
What trends are increasing effectiveness and importance of RM strategies?
- shift to service economies
- aging population and shift of purchasing power
- increased global competition, "me too" offerings, and faster product commoditization
- firms look for additional sources of SCA and higher marketing ROI
How do RM activities affect performance - directly/indirectly?
RM --> Relationship Equity --> Customer Behaviors --> Financial Performance.
- RM activities do not directly affect financial performance, instead they build relationship equity which influences customer behaviors which improves the seller's financial outcomes
Cooperative behaviors
complementary actions between parties to achieve a mutual goal. A means to create value beyond what each individual firm could do on its own
Relational loyalty
likelihood that the customer provides the seller benefits in the exchange process due to their relational attitudes and ties
Referrals/Word of Mouth (WOM)
reflects the likelihood that a customer comments positively about a seller to others
Empathetic behaviors
a greater likelihood of being influenced by perceptions of the seller's position (customers in strong relationships may attribute service failures to external causes that the seller cannot control which reduces the impact of those failures on purchase behaviors)
Why is preventing the bad more important than maintaining the good?
negative behaviors impact relationships more than positive ones. A negative event can overwhelm an accumulation of positive activities
What role does unfairness play?
it undermines relationships since individuals feel an emotional need to punish unfair behaviors
When RM doesn't work
some customers avoid relationships because of hassle/cost/time or to prevent psychological debt
When is RM more effective?
- with customers that are "relationship oriented",
- desire/need relationship to "solve an exchange problem
- want governance benefits
Exploratory/early stage
beginning of most relationships, feature limited confidence in the partner's ability and trustworthiness but also a willingness to explore the relationship to determine if the potential benefits exceed those available from alternative options
Growth/development stage
move into stage after initial experiences are positive and produce the desired outcomes, as well as evidence of trustworthiness
Maturing/maintaining stage
reached if relationship continues and the partners continue to obtain benefits and greater interdependence. Strongest/greatest relationship quality
Decline/recovery stage
entered in response to specific events (conflict, unfairness, betrayal) or passive neglect (failure to communicate, ending investment)
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