Ch. 08.doc

CHAPTER EIGHT VALUE PROPOSITIONS: MANAGING THE ORGANIZATION’S OFFERINGS Key Points The purpose of this chapter is to clarify the challenge of creating the “Value proposition” in a nonprofit environment. Nonprofit marketers have especially difficult challenges when they mount offers for campaigns that address problematic behaviors. These are: (1) They often must meet extravagant expectations, they are often asked to influence (2) nonexistent or (3) negative demand; (4) they often have to target illiterate audiences; (5) They often address highly sensitive issues; (6) The behaviors to be influenced often have invisible benefits; (7) The behaviors to be influenced often have benefits primarily to third parties; (8) The behaviors are often crafted by the target audience and frequently require self-rewards; (9) The behaviors often involve intangibles that are difficult to portray; (10) Influence can take a very long time; (11) Campaigns frequently face intense public scrutiny; and (12) Influence on social behaviors is often very hard to detect. Nonprofit marketing offers are proposals by a marketer to make available to a target audience a value proposition consisting of a desirable combination of positive and negative consequences if, and only if, the target audience undertakes a desired action. There are two levels at which nonprofit marketers want to generate exchanges: (1) with the organization itself, and (2) exchanges sought by various clients or target audiences that are the focus of the organization’s mission and where the benefits may accrue to a third party. A product offering is a tangible offering which has three levels. The core product defines the needs the product meets. The tangible product is its forms — features, styling, quality, packaging and branding. The augmented product is the tangible product plus additional services and benefits such as installation, after sale services, delivery, credit and warranty. Increased competition forces an organization to pay close attention to the length, width and depth of its product offerings. While some nonprofits work in the “product” world — such as Goodwill stores or Museum shops, most nonprofits are in the service business. Nonprofits primarily deliver services through people, places, or the use of objects or equipment. A service is any personal help offered to a target audience that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. A service is typically intangible, inseparable from its producer, variable in its characteristics, perishable, and dependent on the involvement of the target audience in its production. Service organizations face the challenge of making the intangible tangible. Inseparability means that services are synonymous with the people who deliver the service, and therefore service marketers must make extra effort to ensure that key frontline members of the organization have a “customer first” attitude. Internal systems must be in place to empower frontline people to meet the target audience’s needs and wants. Hiring and training good employees and routinizing services can manage variability in service quality. The perishability requires attention to supply and demand, which can be adjusted through creative pricing, change of personnel and facilities, and sharing of services with other organizations during peak periods. Target audience involvement in service delivery can enhance demand and satisfaction if services are user friendly, and target audience members trained to be effective and appreciative co-producers. Some “pure behaviors” can only be managed by marketing campaigns designed to clearly communicate the benefits and costs of doing (or not doing) a particular behavior desired by the nonprofit organization. Chapter Outline The “Offer” as part of the marketing mix Unique challenges to nonprofits The Value Proposition Definition Positive and negative consequences Product Marketing Product item decisions Product mix decisions Services Marketing Intangibility Inseparability Variability Perishability Target audience involvement Pure Behaviors Vignette: Cabs for Seniors This vignette discusses the nature of a nonprofit offering by focusing on the challenge of transportation for the elderly. This service has traditionally been difficult and requires the elderly to adjust their schedules to the availability of volunteers or ride services. The Independent Transportation Network in Portland, Oregon redefined the “offer”, creating a club membership type of organization in which the elderly could earn or pay for “ride credits” and have availability 24/7. Each elderly “member” creates an account, with their own money, with donations from family or the general fundraising of the organization. Members can earn ride credits by volunteering for the organization, having family members do so, etc. While each ride results in a charge, there are monetary incentives for advanced scheduling and ride sharing. Chapter Summary This chapter examines the considerations that go into the design and management of an organization’s offer mix. Nonprofit marketers have especially difficult challenges when they mount offers for campaigns that address problematic behaviors. These are: (1) They often must meet extravagant expectations, they are often asked to influence (2) nonexistent or (3) negative demand; (4) they often have to target illiterate audiences; (5) They often address highly sensitive issues; (6) The behaviors to be influenced often have invisible benefits; (7) The behaviors to be influenced often have benefits primarily to third parties; (8) The behaviors are often crafted by the target audience and frequently require self-rewards; (9) The behaviors often involve intangibles that are difficult to portray; (10) Influence can take a very long time; (11) Campaigns frequently face intense public scrutiny; and (12) Influence on social behaviors is often very hard to detect. Nonprofit marketing offers are proposals by a marketer to make available to a target audience a value proposition consisting of a desirable combination of positive and negative consequences if, and only if, the target audience undertakes a desired action. There are two levels at which nonprofit marketers want to generate exchanges: (1) with the organization itself, and (2) exchanges sought by various clients or target audiences that are the focus of the organization’s mission and where the benefits may accrue to a third party. Product marketing offers products as individual items, a product mix, or a product line. In developing a product, nonprofit marketing manager distinquishes three levels of the concept of a product: The core product, the tangible product, and the augmented product. The core product answers the questions: what is the target audience really seeking? What need is the product satisfying? (e.g. a university sells textbooks, but students are really seeking future earning power.) The tangible product has five characteristics: features, styling, quality, packaging, and branding. The augmented product offers additional services and benefits that go beyond the tangible product (e.g. inducing a news director to run a nonprofit’s TV public service announcement may involve hand-delivering it and re-editing the content to permit the insertion of commentary by the local newscaster.) The product mix consists of its length; width and depth, each of which can be altered to improve overall mix performance. The products differ in their roles and contributions to the organization, from product leaders or flagship products to ancillary products. A substantial majority of nonprofit organizations are basically in the services business. A service is any personal help offered to a target audience that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. In these exchanges, the nonprofit supplies (1) people who provide a service — educate, conduct tours, do surgery, etc.; (2) places where target audience can interact, such as playing golf on a city-run golf course, visit animals in a zoo, or sunbathe on county owned beaches; and (3) the use of object s or equipment so that that target audiences can do such things as read books taken from a library, view stars through a University planetarium, or travel on a government owned train. Services tend to have five characteristics: intangibility (cannot be seen, tasted, felt, heard or smelled prior to purchase — e.g. visiting a psychiatrist); inseparability from the producer (production and consumption occur simultaneously — e.g. attending a concert); variability in characteristics — (highly variable on who provides the service, and when — e.g. a opera sung by an Opera star versus the same piece of music sung by a high school chorus); perishablity (cannot be stored — e.g. a seat at a particular theater performance); and are dependent on target audience involvement (e.g. psychological counseling or an Alcoholics Anonymous group session). The design of service offerings presents five major challenges: Making the intangible tangible (e.g. diplomas, award and brand names can signify high quality and distinction in education). Atmospherics such as the quality of the brochure or the cleanliness of a soup kitchen affect the target audience response to the offer. For instance, a T-shirt given to individuals competing in a fund-raising walk or run makes the service more tangible. Making a virtue of inseparability. The fact that a service is indistinguishable from the person delivering it means negative effects can easily occur. A person visiting a museum who encounters a surly or rude guard or a social worker who makes clients feel like they are ruining his or her day by mentioning problems can ruin a nonprofit organization’s “value proposition.” These common occurrences are caused by a lack of orientation and training of service personnel and can be remedied by internal marketing and target audience service training to teach employees about the “moments of truth” in every encounter made by the target audience with the organization. “User friendliness” has become an important component of relationships for high-performing nonprofit organizations. Managing variability — Quality delivered with consistency is difficult for nonprofits that frequently rely on volunteers or low paid workers. Good personnel selection training programs (including for volunteers) and routinizing or automating parts of the service help to create consistency. An additional step to controlling variability is to develop target audience satisfaction monitoring systems such as complaint systems, target audience satisfaction surveys, and comparison or mystery shopping. Managing perishability — Service organizations constantly seek to balance capacities – called “operant resources” – between levels, which create waste if they are too high, or create dissatisfaction or chaos of they cannot meet demand. Service managers must seek to help bring the supply and demand levels into balance. Strategies for managing demand include such tactics as: differential pricing, non-peak demand creation, complementary services and reservation systems. On the supply side, strategies could include: using part-time employees to serve peak demand; peak-time efficiency routines to minimize work which is not absolutely essential at the moment; Target audience participation in tasks can be increased, such as having people fill out their own forms while waiting instead of having a clerk or employee do it; shared services can be developed; and expandable facilities can be planned. Helping target audiences consume services — Many services depend on collaborating with the target audience to jointly produce the service. The service should be designed to be optimally user friendly, such as a museum designing different pre-planned tours through the museum for different types of visitors. An alternative is to try to teach the target audience how to be a better target audience (e.g. Universities providing how-to-study programs for students). It is important to remember that target audience contact should be a continuing activity so that relationships are formed which make target audiences partners in the service experience. There remain sets of behaviors that nonprofit marketers seek to induce that do not involve products or services the marketer controls and provides. These are often cases where the value proposition is to create something of value to society such as stopping spousal abuse or conserving water. Campaign approaches, which use operant resources, are effective in activities, which make the desired behaviors easier or the undesirable behaviors more difficult. These may include such things as influencing lawmakers to introduce a non-smoking law or rounding up community leaders to speak out on issues such as crime in the community. Teaching Suggestions Continue to attempt to vary the lecture environment and style and introduce variance into the reading assignments and reading assessment to reinforce traditional retention. Continue to try to find new ways to incorporate visual and audio elements into the class. To demonstrate the nature of product versus service, take a “field trip” to a nonprofit that sells a product (such as goodwill) and also visit a service-oriented organization such as hospital. Use the trip as an opportunity to discuss the elements of both tangible products and intangible services Frequent discussion helps to illustrate key points – discussion of text points can lead to the next text point or key learning. Possible discussion points for this chapter include: Using the three levels of the product, review the differences between the core product, the tangible product and the augmented product. Let the students discuss the three levels offered by three different kinds of nonprofits such as the American Red Cross, a smoking cessation program and a public library. What can the latter two do to respond to competition? Make the distinction between products and services by introducing and explaining the concepts of intangibility, inseparability, variability, perishability, and target audience involvement. Encourage a discussion by contrasting the educational program in which you are teaching with that of a competitor. For example, an evening management program for adults may be more intangible, inseparable, variable, and perishable than a distance-learning course offered through the Internet, whereas that alternative necessitates lower levels of student involvement in its production. Suggest that the students use the chart on pages 198 (Figure 8-3 – Lovelock’s types of services) to break down a particular service like providing a student health service on the University campus. For example, tangibility could vary with condoms being offered on a state-school campus but not be offered at a Catholic University, whereas, the Catholic University might offer spiritual counseling services which the state school might not. Access or location of delivery of some services could vary from a clinic site, to remote stations in dorms to a “house call” system. Discuss the “pure behavior” challenges on page 204 discuss how products or a more tangible approach could influence a particular desired behavior like smoking cessation. Short Answer Questions Describe the components of a marketing offer and their implications Products, services and the target audience’s own actions are vehicles for the delivery of consequences. Target audiences look at the positive and negative consequences and evaluate the delivery mechanism in terms of whether it has the desired combination of consequences. Focus should not be on products as things, but as providers of consequences (e.g. target audiences do not want a good violinist, they want beautiful music). In some cases the target audiences themselves deliver the consequences, such as in recycling. Describe the levels of the concept of a product Core product – satisfies wants and needs Tangible product – features, styling, quality, packaging and branding Augmented product - additional services and benefits Describe the characteristics of a service Intangibility — can’t be seen, heard, felt, tasted or smell prior to purchase Inseparability — production and consumption occur simultaneously Variability — service isn’t always the same, variable components Perishability — cannot be stored – time sensitive Dependent on target audience involvement — cooperative activities Describe the challenges in the design of service offerings Making the intangible tangible – representative products (diploma) Making a virtue of inseparability – internal marketing required Managing variability — develop personnel training and monitor satisfaction Managing perishability — Use strategies for managing supply and demand Helping target audiences consume — Create “user friendly” services Multiple Choice Questions If the target audience is to undertake the action desired by the marketer, the offer must a. eliminate all the negative consequences b. provide a desired combination of positive and negative consequences in the form of a value proposition (Easy; p 191) c. maintain the status quo d. provide products with the right attributes e. provide a mix of products and services The three levels of the concept of a product are as follows: a. the product mix, product line and product item b. the features, styling, packaging, and quality c. the core product level, intangible product level and augmented product level d. the core product level, tangible product level and augmented product level (Moderate; p 194 ) (AACSB – Reflective Thinking) e. the product level, the service level and the pure behavior level The advantage of branding a product is that it a. differentiates the product from those of competitors (Moderate; p 195) b. makes the product more tangible c. changes the core benefit offered d. provide products with a distinctive look or feel e. all of the above A product mix can be described in terms of its a. length, height and line b. response function c. brands and features d. length, width and depth (Easy; p 196) e. core, tangible and augmented levels A patient going to a psychiatrist for counseling cannot know the result before using the service because a. there is a product involved b. it is intangible (Easy; p 197) (AACSB – Reflective Thinking) c. it has secondary cues d. all of the above e. none of the above Undertaking strategies of differential pricing, reservation systems and charging for missed service appointments address which characteristic of services? a. Intangibility b. Inseparability c. Variability d. Perishability (Moderate; p 199) e. Target audience involvement Undertaking strategies of suggestion boxes, complaint systems and customer surveys address which characteristic of services? a. Intangibility b. Inseparability c. Variability (Moderate; p 201) (AACSB – Reflective Thinking) d. Perishability e. Target audience involvement A museum that provides wall posters, tape-recorded guides and tours is addressing which characteristic of services? a. Intangibility b. Inseparability c. Variability d. Perishability e. Target audience involvement (Moderate; p 203) (AACSB – Reflective Thinking) Good service organizations do not focus on individual transactions, they a. work on developing a strong volunteer system b. build long-term relationships (Moderate; p 203) c. expand their services d. use differential pricing e. work to increase audience involvement The best way to avoid negative service encounters is through a. using volunteers b. hiring experienced employees c. internal marketing (Easy; p 200) d. providing quality products e. having a target audience satisfaction program Using operant resources effectively address which characteristic of services? a. Intangibility b. Inseparability c. Variability d. Perishability (Moderate; p 202) e. Target audience involvement 78