3 positioning
TRANSCRIPT
Lecture Three
• Positioning Services
in Competitive
Markets
• Developing Service
Products (Chapters 3 and 4)
Service Quality MKTG 1268
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Jan 2012 Semester
This lecture:
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Heavy set of topics
Two chapters involved (3 and 4)
Need to read up EARLY in order to work on
your project
Critical topics for understanding Service
Marketing
Positioning is at the CORE of strategy
• Positioning Services in Competitive Markets
Chapter Three 3
Overview of Chapter 3
Achieve Competitive Advantage through Focus
Market Segmentation Forms the Basis for Focused Strategies
Service Attributes and Levels
Developing an Effective Positioning Strategy
Using Positioning Maps to Analyze Competitive Strategy
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Focus Underlies the Search for
Competitive Advantage
Intensifying competition makes it important to differentiate products
In mature markets, only way to grow may be to take a share from competitors
Brand positioning helps create awareness, generate interest and desire among potential customers and increase adoption of service products
Emphasize competitive advantage on those attributes that will be valued by customers in target segment(s)
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Standing Apart from the Competition
A business must set itself apart from its competition.
To be successful it must identify and promote itself
as the best provider of attributes that are
important to target customers
Professor George S. Day
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Basic Focus Strategies for Services (Fig. 3.2)
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Fully focused
Limited range of services to narrow and specific market
Opportunities
Developing recognized expertise in a well-defined niche may provide protection against would-be competitors
Allows firms to charge premium prices
Risks
Market may be too small to generate needed volume of business
Demand for a service may be displaced by generic competition from alternative products
Purchasers in chosen segment may be susceptible to economic downturn
Considerations for Using the
Focus Strategies (1) 8
Market focused
Narrow market segment with wide range of services
Need to make sure firms have operational capability to do an deliver each of the different services selected
Need to understand customer purchasing practices and preferences
Service focused
Narrow range of services to fairly broad market
As new segments are added, firm needs to develop knowledge and skills in serving each segment
Considerations for Using the
Focus Strategies (2) 9
Unfocused
Broad markets with wide range of services
Many service providers fall into this category
Danger – become a “jack of all trades and master of none”
Considerations for Using the
Focus Strategies (3) 10
Market Segmentation
Firms vary widely in ability to serve different types of customers
Adopt strategy of market segmentation, identifying those parts of market can serve best
A market segment is composed of a group of buyers sharing common:
Characteristics
Needs
Purchasing behavior
Consumption patterns
Within segments, they are as similar as possible. Between segments, they are as dissimilar as possible
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Identifying and Selecting Target Segments
A target segment is one that a firm has selected from among those in the broader market and may be defined on the basis of multiple variables
Must analyze market to determine which segments offer better opportunities
Target segments should be selected with reference to Firm‟s ability to match or exceed competing offerings
directed at the same segment
Not just profit potential
Some „underserved‟ segments can be huge, especially poor consumers in emerging economies, e.g. low-income group in Philippines
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Understanding the target market
What level of quality and performance is required
for each attribute?
Are there significant differences between segments
in the importance that customers attach to different
attributes?
How well do competing service products meet
customer requirements?
Can a service be redesigned, provided in a
different way, place or time so that it meets
customer needs more closely and is superior to
competing offerings? 13
Developing Right Service Concept for a
Specific Segment
Use research to identify and prioritize which
attributes of a given service are important to
specific market segments
Individuals may set different priorities according to:
Purpose of using the service
Who makes decision
Timing of use
Whether service is used alone or with a group
Composition of that group
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Illustrative segmenting of a financial services
market and recommended strategy
Recommended
marketing
strategy
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Important vs. Determinant Attributes
Consumers usually choose between alternative service offerings based on perceived differences between them
Attributes that distinguish competing services from one another are not necessarily the most important ones
Important attributes are not necessarily those attributes that determine which service brand the consumer finally selects
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Important vs. Determinant Attributes
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Important attributes: are met by all competing service providers
do not necessarily sway the purchase decision in favor of one service provider as opposed to another
Determinant attributes determine buyers‟ choices between competing alternatives Service characteristics that are important to purchasers
Customers see significant differences between competing alternatives on these attributes
Establishing Service Levels
Need to make decisions on service levels – level of performance firm plans to offer on each attribute
Easily quantified attributes are easier to understand and generalizable – e.g. vehicle speed, physical dimensions
Qualitative attributes are ambiguous and subject to individual interpretation – e.g. physical comfort, noise levels
Can often segment customers according to willingness to give up some level of service for a lower price
Price-insensitive customers willing to pay relatively high price for high levels of service on each important attribute
Price-sensitive customers look for inexpensive service with relatively low performance on many key attributes (e.g., Services Insights 3.2 Capsule Hotels)
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Four Principles of Positioning Strategy
Must establish position for firm or product in minds of target customers
Position should provide one simple, consistent message
Position must set firm/product apart from competitors
A company cannot be all things to all people - must focus its efforts
Jack Trout
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Positioning’s role in marketing strategy (1)
Where in the market should we compete,
against whom and on what terms?
Who are, or should be, our target markets?
What is our service product or service concept,
and what are its distinguishing characteristics
(points of difference)?
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What is the value of what we have to offer
and how does this compare with the value
offered by competing service providers?
• What do we want our service product to
become, and what will it take to get it there?
Positioning’s role in marketing strategy (2)
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Principles of Positioning
Avoid trap of investing too heavily
in points of differences that are
easily copied!
What does our firm stand for in
the minds of current and
potential customers?
What customers do we serve now, and which ones would we like to target?
What is value proposition for our
current service products, and
market segments?
How does each of our service
products differ from competitors’?
How well do target customers perceive our service products
as meeting their needs?
What changes must we make to
strengthen our competitive position?
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Developing an Effective Positioning Strategy
Positioning links market analysis and competitive analysis to internal corporate analysis
Market Analysis
Focus on overall level and trend of demand and geographic locations of demand
Look into size and potential of different market segments
Understand customer needs and preferences and how they perceive the competition
Internal Corporate Analysis
Identify organization’s resources, limitations, goals, and values
Select limited number of target segments to serve
Competitor Analysis
Understand competitors‟ strengths and weaknesses
Anticipate responses to potential positioning strategies
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See slide 27
The building blocks of a successful
positioning strategy (and customer value proposition)
Points of difference
Points of contention
Points of parity
Points of parity versus points of
difference
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Points of difference, points of parity and points of contention
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Key marketing mix elements of BreadTalk‟s
positioning strategy
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Market, Internal and Competitive Analyses (Fig. 3.11)
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Using Positioning Maps to Analyze
Competitive Strategy
Great tool to visualize competitive positioning and map developments of time
Useful way to represent consumer perceptions of alternative products graphically
Typically confined to two attributes, but 3-D models can be used to portray positions on three attributes simultaneously
Also known as perceptual maps
Information about a product can be obtained from market data, derived from ratings by representative consumers, or both
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Selected courier services:
positioning map of speed of delivery versus cost
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Selected courier services:
positioning map of speed of response versus fulfilment
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Positioning of Belleville Hotels:
Service Level vs. Price (Fig. 3.15)
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Positioning of Belleville Hotels:
Location vs. Physical Luxury (Fig. 3.16)
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Future Positioning of Belleville Hotels:
Service Level vs. Price (Fig. 3.18)
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Future Positioning of Belleville Hotels:
Location vs. Physical Luxury (Fig. 3.19)
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Positioning maps display relative performance of competing firms on key attributes
Research provides inputs to development of positioning maps - challenge is to ensure that
Attributes employed in maps are important to target segments
Performance of individual firms on each attribute accurately reflects perceptions of customers in target segments
Predictions can be made of how positions may change in light of future developments
Simple graphic representations are often easier for managers to grasp than tables of data or paragraphs of prose
Charts and maps can facilitate “visual awakening” to threats and opportunities, suggest alternative strategic directions
Positioning Maps Help Managers to
Visualize Strategy 35
Summary for Chapter 3: Positioning Services In
Competitive Markets (1)
Focus underlies search for competitive advantage
Four focus strategies:
Service focused
Fully focused
Market focused
Unfocused
Market segmentation forms the basis for focused strategies
Service attributes that are determinant attributes are often the ones most important to customers
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Summary for Chapter 3: Positioning Services In
Competitive Markets (2)
Positioning distinguishes a brand from its competitors
Positioning links market analysis and competitive analysis to internal corporate analysis
To develop a marketing positioning strategy, we need
Market analysis
Internal analysis
Competitor analysis
Positioning maps are useful for plotting competitive strategy
Mapping future scenarios help identify potential competitive responses
Positioning charts help visualization of strategy
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Developing SERVICE Products: Core and
Supplementary Elements
Chapter Four 38
Overview of Chapter 4
Designing a Service Product
The Flower of Service
Branding Service Products and
Experiences
New Service Development
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Service Product
A service product comprises all elements of service performance, both tangible and intangible, that create value for customers.
The service concept is represented by:
A core product,
Accompanied by supplementary services
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Designing a Service Concept (1)
Core Product Central component that supplies the principal,
problem-solving benefits customers seek
Supplementary Services Augment the core product, facilitating its use and
enhancing its value and appeal
Delivery Processes Used to deliver both the core product and each of the
supplementary services
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Designing a Service Concept (2)
Service concept design must address the following issues:
How the different service components are delivered to the customer
The nature of the customer‟s role in those processes
How long delivery lasts
The recommended level and style of service to be offered
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Alternative service concepts for meal delivery
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Integration of Core Product, Supplementary
Elements and Delivery Process (Fig. 4.3) 44
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The Flower of Service (Fig 4.4) (1)
Core
Information
Consultation
Order-Taking
Hospitality
Payment
Billing
Exceptions
Safekeeping
Facilitating elements
Enhancing elements
KEY:
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The Flower of Service (2)
There are two kinds of supplementary services Facilitating supplementary services – either needed
for service delivery, or help in the use of the core product
Enhancing supplementary service – add extra value for the customer
In a well-designed and well-managed service organization, the petals and core are fresh and well-formed
Market positioning strategy helps to determine which supplementary services should be included
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Supplementary Services (1)
Facilitating Information – customers often require information
about how to obtain and use a product or service
Order-Taking – Customers need to know what is available and may want to secure commitment to delivery. The process should be fast and smooth
Billing – Bills should be clear, accurate and intelligible
Payment – Customers may pay faster and more cheerfully if you make transactions simple and convenient for them
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Supplementary Services (2)
Enhancing
Consultation – Value can be added to goods and services by offering advice and consultation tailored to each customer‟s needs and situation
Hospitality – Customers who invest time and effort in visiting a business and using its services deserve to be treated as welcome guests
Safekeeping – Customers prefer not to worry about looking after the personal possessions that they bring with them to a service site
Exceptions – Customers appreciate some flexibility when they make special requests and expect responsiveness when things don‟t go according to plan
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Facilitating Services – Examples of Information (Fig. 4.5)
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Facilitating Services – Examples of Order-Taking (Fig. 4.7)
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Facilitating Services – Examples of Billing (Fig. 4.9)
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Facilitating Services – Examples of Payment (Fig. 4.10)
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Enhancing Services – Examples of Consultation (Fig. 4.11)
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Enhancing Services – Examples of Hospitality (Fig. 4.13)
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Enhancing Services – Examples of Safekeeping (Fig. 4.14)
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Enhancing Services – Examples of Exceptions (Fig. 4.15)
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Managerial Implications
Not every core product is surrounded by supplementary elements from all eight clusters
Nature of product helps to determine:
Which supplementary services must be offered
Which might usefully be added to enhance value and ease of doing business with the organization
People-processing and high contact services tend to have more supplementary services
Firms that offer different levels of service often add extra supplementary services for each upgrade in service level
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Service Products
A product implies a defined and consistent “bundle of output”
Firms can differentiate its bundle of output from competitors‟
Providers of more intangible services also offer a “menu” of products Represent an assembly of elements that are built
around the core product
May include certain value-added supplementary services
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Product Lines And Brands
Most service organizations offer a line of products rather than just a single product.
They may choose among 3 broad alternatives:
Single brand to cover all products and services
A separate, stand-alone brand for each offering
Some combination of these two extremes
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A services branding model
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Spectrum of Branding Alternatives (Fig 4.18)
Source: derived from Aaker and Joachimsthaler
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Example: British Airways Sub-brands
British Airways offers seven distinct air travel products
Intercontinental Offerings Intra-European
Offerings
First (Deluxe
Service)
Club World
(Business
Class)
World
Traveller Plus
(Premier
economy)
World
Traveller
(Economy)
Club Europe
(Business
Class)
Euro-Traveller
(Economy)
Shuttle
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Offering a Branded Experience (1)
Branding can be used at both company and product levels
Corporate brand:
Easily recognized
Holds meaning to customers
Stands for a particular way of doing business
Product brand:
Helps firm establish mental picture of service in consumers‟ minds
Helps clarify value proposition
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Offering A Branded Experience (2)
“The brand promise or value proposition is
not a tag line, an icon, or a color or a graphic
element, although all of these may contribute.
It is, instead, the heart and soul of the
brand….”
Don Schultz
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A Hierarchy of New Service Categories (1)
1. Style changes
Visible changes in service design or scripts
2. Service improvements
Modest changes in the performance of current products
3. Supplementary service innovations
Addition of new or improved facilitating or enhancing elements
4. Process-line extensions
Alternative delivery procedures
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A Hierarchy of New Service Categories (2)
5. Product-line extensions
Additions to current product lines
6. Major process innovations
Using new processes to deliver existing products with added benefits
7. Major service innovations
New core products for previously undefined markets
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Achieving Success in Developing New Services
In developing new services,
Core product is of secondary importance
Ability to maintain quality of the total service offering is key
Accompanying marketing support activities are vital
Market knowledge is of utmost importance
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Success Factors in New Service Development
Market synergy
Good fit between new product and firm‟s image/resources
Advantage vs. competition in meeting customers‟ needs
Strong support from firm during/after launch
Firm understands customer purchase decision behavior
Organizational factors
Strong interfunctional cooperation and coordination
Internal marketing to educate staff on new product and its competition
Employees understand importance of new services to firm
Market research factors
Scientific studies conducted early in development process
Product concept well defined before undertaking field studies
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Summary of Chapter 4: Developing Service Concepts (1)
Creating services involve:
Designing core product, supplementary services and delivery process
Flower of service includes core product and two types of supplementary services: facilitating and enhancing
Facilitating services include information, order taking, billing, and payment
Enhancing services include consultation, hospitality, safekeeping, and exceptions
Spectrum of branding alternatives exists for services
Branded house
Subbrands
Endorsed brands
House of brands
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Summary of Chapter 4: Developing Service Concepts (2)
Seven categories of new services:
1. Style changes
2. Service improvements
3. Supplementary service innovations
4. Process-line extensions
5. Product-line extensions
6. Major process innovations
7. Major service innovations
Success factors in new service development:
Market synergy
Organizational factors
Market research factors
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