Bookmark It! OBJECTIVES: 1 Explain the Marketing of People, Places, and Ideas

PART III Creating the Value Offer Bookmark It! OBJECTIVES: 1 Explain the marketing of people, places, and ideas. 2 Describe the four characteristics of services and understand how services differ from goods. 3 Explain how marketers create and measure service quality. 4 Explain marketing strategies for services. 308 Marketing: Real People, Real Choices, Fourth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Prentice Hall. Copyright © 2006 by Pearson Education, Inc. Marketing What Isn’t There 11 INTANGIBLES AND SERVICES Real People, Real Choices: Meet Julie Sanoff, a Decision Maker at American Express http://home3.americanexpress.com/rewards/explore/explore.asp CURRENT POSITION: Senior Manager, Business Alliances Division, American Express Consumer Card Services Group. CAREER PATH: 1992 B.S. in Marketing, Rutgers University. May 1992–January 1993: Account Executive with a small New Jersey computer company January 1993–December 1994: Assistant Marketing Analyst, Morgan Stanley December 1994–August 1998: Manager, Sales Promotion, L’Oréal USA. In charge of all in-store advertising and promotion of the Lancome brand for northeastern U.S. retail stores and specialty accounts (Saks Fifth Avenue, Neiman Marcus, Bloomingdale’s, and Nordstrom) across the country. August 1998–Present: American Express WHAT I DO WHEN I’M NOT WORKING: Spend time with my husband and young twins. FIRST JOB OUT OF SCHOOL: Sales rep for a computer company. HERO: My father. MOTTO: Live for the moment! MANAGEMENT STYLE: Autonomy. Give it to people and watch them flourish! PET PEEVE: Being late. The Rewards of Membership: Don’t Leave Home Without Them! The AMEX Membership Rewards Program has given enrollees the opportunity to earn points for every dollar they charge on their American Express credit card. They can then redeem these points for travel, retail products, and gift certificates good at participating retail merchants. Enrollees pay a fee to join the program, which has been selectively marketed to about 4 million high-spending card members. Membership Rewards is a valuable way for American Express to create and maintain loyalty both among the merchants who accept American Express and the cardholders—impor- tant in the highly competitive credit card industry. The roster of participating merchants is crucial to the success of the program, because cardholders won’t be motivated to participate (and use their American Express cards) if their points can’t be redeemed for products and services they want. The participating retail merchants have included Saks Fifth Avenue, Linens-n-Things, Gap, Coach, Tourneau, Dell, and Crate and Barrel. However, the problem was that most enrollees were redeeming their points for travel rewards, which are much more expensive to American Express than retail rewards because the company tends to get greater discounts from the retailers than from the airlines. Julie Sanoff had to find a way to make the retail category more attractive to cardholders. She needed to understand whether members were not redeeming enough points with the participating retailers because there were not enough choices or if something else was causing the problem. 309 Marketing: Real People, Real Choices, Fourth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Prentice Hall. Copyright © 2006 by Pearson Education, Inc. Julie and her team researched how enrollees make decisions about redeeming points and what products and services they might add to the program. They RealReal People,People, sent cards listing product rewards to a sample of about 350 enrollees, including some who had never redeemed points for rewards. Julie asked enrollees to rank YourYour Choices:Choices: these rewards in order of interest. A number of respondents liked the idea of adding restaurant and entertainment awards to AMEX’s current mix of retailers. Think and Do Like a Marketer Based on these results, Julie considered her options: Why are people motivated to collect miles in a loyalty program like the one that AMEX runs? Option 1: Add new rewards categories. What would convince them to redeem their precious miles for merchandise rather than Expand into new categories such as dining and entertainment to satisfy the free plane tickets? Try to find people who respondents interested in these types of rewards. Doing so would give the pro- participate in the AMEX program and/or one gram more breadth and depth and bring it in line with competitors’ programs of the rival programs such as Diners Club. Ask that are for smaller-ticket items, meaning that competitors’ members need less them why they decided to open their account points to get rewards. And if more consumers were attracted to these new cat- with one or the other. egories, it might pull them away from more expensive travel rewards. But Julie wasn’t sure it would be worth the time and cost to sign on these new merchants if not enough members would redeem their points in these categories. Option 2: Focus marketing efforts on the most popular rewards. Streamline the existing rewards to reduce overlap and lack of appeal of certain rewards, redirecting marketing resources to promote the most popular offerings. Julie discovered significant duplication across reward categories (for example, both Sony and Toshiba offered stereos) and realized she could optimize American Express’s offerings by removing certain rewards from the program altogether and including only the most appealing ones. But removing some partners might inadvertently take away some specialized products that appealed to American Express’s highest spenders, such as the Richard Petty Driving Experience at Disney World. Although this reward interests only a few high spenders, it adds to the appeal of the program and cements the strong relationship AMEX has with Disney. Option 3: Reduce breadth of reward selection while increasing the depth of certain reward categories. Streamline the partners in the program and just offer more rewards from this select group. This would make the program a bit more manageable, and it would be less expensive to mar- ket a smaller group of partners. However, the program would lose some breadth and its repu- tation of having many choices for enrollees. Competitive programs might benefit by seeming to provide more offerings. In addition, dropping a member from the Membership Rewards program might alienate a company that has a strong relationship with American Express. Now, put yourself in Julie Sanoff’s shoes: Which option would you pick, and why? Marketing What Isn’t There At one level, American Express is just selling a little piece of plastic you keep in your wallet. But, of course, this particular little card is much more than that—for some, it’s the ticket to a dream, for others a way to show off. Julie Sanoff understands the challenges of marketing what people can’t see. As an executive for a major financial services company, she realizes that a customer’s decision to patronize one firm’s card over others is a complex one that includes the company’s image, its “snob appeal,” incentives to be loyal (such as membership rewards), pric- ing, and emotional attachment to a trusted company. These challenges apply to many different kinds of consumer experiences. For example, what do a Pearl Jam concert, a college education, and a football game have in common? Like the AMEX Membership Rewards Program, each is a product that combines experiences with physical goods to create an event that the buyer consumes. You can’t have a concert without instruments, a college education without textbooks (frat parties don’t count), or a pigskin showdown without the pigskin. But these tangibles are secondary to the primary product, which is some act that, in these cases, produces enjoyment, knowledge, or excitement. intangibles ■ Experience- based products that cannot be This chapter will consider some of the challenges and opportunities facing marketers such touched. as Julie Sanoff whose primary offerings are intangibles, experience-based products that cannot 310 PART III CREATING THE VALUE OFFER Marketing: Real People, Real Choices, Fourth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Prentice Hall. Copyright © 2006 by Pearson Education, Inc. be touched. The marketer whose job it is to build and sell a better football, automobile, or MP3 player—all tangibles—must deal with different issues than someone such as Julie who must find ways to make a credit card more attractive. We will spend a lot of time on services, a type of intangible that also happens to be the fastest-growing sector in our economy. As we’ll see, all services are intangible, but not all intangibles are services. So let’s start by considering some types of intangibles other than services before moving into the nuts and bolts of services marketing. DOES MARKETING WORK FOR INTANGIBLES? Obviously, the credit cards you keep are more than mere pieces of plastic. They are tickets to a dream because you can use them to obtain many things. But they can also be free admission to a nightmare if you charge yourself into debt! Even the color of the card becomes a status symbol—that green card is cool to have, but not quite as cool as that gold one, and just watch the eyebrows rise around the table when that lucky guy whips out his platinum! These complex meanings attached to a little piece of plastic remind us that we need to expand the marketing concept and recognize that it applies to many types of “products,” including politicians, the arts, and the places we live and visit. Even an intangible such as electric power, normally thought of as a commodity, is now branded and marketed directly to consumers. In an increasing number of states, customers are allowed to pick an electricity supplier from several competitors as deregulation of the industry continues.

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