Second Level of the Customer Value Hierarchy

Second Level of the Customer Value Hierarchy

Instructions/Descriptions

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Assignment:

Check Your Understanding: Answer the following questions.

1. At the second level of the customer value hierarchy, the marketer has to turn them _____ into a(n) _____.
2. ________ is the totality of features that affect how a product looks and functions in terms of customer requirements.
3. Top firms audit service performance by collecting _____ measurements to probe customer satisfiers and dissatisfiers.
4. Services are typically produced and consumed simultaneously. This is an example of the _____ characteristic of services.
5. In considering an observed price, consumers often compare it to an internal price called a(n) _____ price.
6. When PepsiCo sells its cola syrup to Russia for rubles and agrees to buy Russian vodka at a certain rate for sale in the United States, this is called _____.

Exercises: Answer the following questions.

1. Name and describe the three groups products can be classified into according to durability and tangibility.
2. Identify and explain the six levels of the product hierarchy.
3. What are the five categories of offerings in the product-service mix?
4. What are the five determinants of service quality in order of importance?
5. What is the six-step procedure most firms use to set their pricing policy?

Case Study: Must be at 800 words.

Marketing channels hold risks and opportunities for the toy industry. How have United States toy makers used marketing channel backlash to augment sagging sales?

Toy distributors have suffered in recent years as pricing and marketing-channel costs have risen. This is especially true in the United States toy industry. Over 80 percent of all toys sold in the United States come from foreign manufacturers. Recent massive toy recalls could change this percentage. With scares generated by the lead in the paint used on the toys and by the danger of infants choking from small parts, United States toy distributors are re-evaluating the cost benefits of foreign sources of supply and, instead, are re-focusing on more traditional domestic marketing channels to supply toy products.

United States distributors have found that outsourcing has come at a high cost. The toy distributor that puts its name on a toy is ultimately responsible for the safety of that toy even if the toy is made elsewhere. Consumer confidence in the safety of toys on the shelves of retailers is at an all-time low. What’s the solution to the problem? A growing number of major toy distributors are finding the answer in their own backyard.

An increasing number of major toy distributors are turning to the “once dead” small United States toy manufacturer as a “new source” of supply. United States manufacturer Vermont Wooden Toys has found that its wooden toy inventory is in very high demand. Why? Boutique toy manufacturers are known for producing safe, high-quality toys. Their problems have been their relatively high cost, an inability to produce in high volume, and difficulty in managing expanding marketing channels. These disadvantages are quickly disappearing, as United States toy consumers are once again falling in love with simple, low-tech toys. As the toy industry continues to change, United States toy distributors are betting that “Made in America” will once again be a toy label worth noticing.

Adapted from “U.S. toy makers are on a roll” by Rachel Konrad (Associated Press), Houston Chronicle, October 10, 2007, pp. D1 and D5.

Case study developed by Dr. John R. Brooks, Jr., Houston Baptist University.

Questions:

1. What percentage of U.S. toys are produced by foreign manufacturers? Why might this be a problem?

2. What two consumer concerns drove several massive toy recalls?

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