Lecture Three
• Positioning Services in
Competitive Markets
(Chapter 3)
• Developing Service
Products (Chapter 4)
Service Quality MKTG 1268
JAN 2013 Semester
1
This lecture:
Heavy set of topics: two chapters involved (3
and 4)
Need to read up EARLY in order to work on
your project
IMPORTANT topics for understanding Service
Marketing especially on the elements of the
service product
Positioning is at the CORE of strategy
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Positioning Services in Competitive Markets
Chapter Three 3
Overview of Chapter 3
Customer-Driven Services Marketing Strategy
Segmenting Service Markets
Targeting Service Markets
Positioning Services
Using Positioning Maps to Analyze Competitive
Strategy
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Customer-Driven Services Marketing Strategy
Developing a services marketing positioning strategy (Fig. 3.1)
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Customer-Driven Services Marketing Strategy
Customer, Competitor and Company Analysis (3Cs)
• Customer analysis Overall examination of market characteristics
Customer needs and related characteristics and behaviors
• Competitor analysis Current positioning
Strengths and weaknesses
• Company analysis Current brand positioning and image
Resources
Limitations and constraints
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Conducting SWOT Analysis of the Company
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Customer-Driven Services Marketing Strategy
Segmentation, Targeting and Positioning
• Segmentation
Dividing population of possible customers into groups with
common service-related characteristics
Similar needs within same segment, different needs
between segments
• Targeting
Choose one/more segments to focus on
• Positioning
Unique place in the minds of customers
Differentiation forms first step to creating unique positioning
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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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Segmenting Service Markets
Market Segmentation
• Various ways to segment markets
Demographics ― on its own will not result in
meaningful segments
Psychographic segmentation – useful for
strengthening brand identity and creating
emotional connection
Behavioral segmentation – focuses on observable
behavior
Needs-based segmentation – focuses on what
customers truly want in a service
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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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Targeting the right group of customers
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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
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
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Determinant attributes for business travellers
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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
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Establishing Service 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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Capsule Hotels (what type of customer and what are
their service expectations? (read Service Insight 3.2) 19
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Targeting Service Markets
Achieve Competitive Advantage through Focus
(Fig. 3.5)
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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) 21
Example of a fully focused strategy – private air
charter for VIPs 22
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) 23
Market Focused (Rentokil) – read Service Insight 3.3
on page 78 24
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) 25
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 : One Key Message - Globally
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Positioning Services
Six Questions for Effective Positioning Strategy
1. What does our firm currently stand for in the minds of current
and potential customers?
2. What types of customers do we serve now, and which ones
would we like to target in future?
3. What is value proposition for each of our current service
products, and what market segments is each one targeted at?
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Positioning Services
Six Questions for Effective Positioning Strategy
4. How does each of our service products differ from competitors‟?
5. How well do customers in chosen target segments perceive our
service products as meeting their needs?
6. What changes must we make to our offerings to strengthen our
competitive position?
Avoid trap of investing too heavily in points of differences that are easily copied
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Key marketing mix elements of BreadTalk‟s
positioning strategy
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Positioning Services
Developing an Effective Positioning Strategy
• Point of difference
Most compelling benefit offered by brand that
stands out from competitors
• Reason to believe
Proof that brand can deliver the benefits that are
promised
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Points of difference, points of parity and points of contention
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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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An example of
positioning of a
luxury hotel –
Dubai‟s Burj Al Arab
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Using Positioning Maps to Analyze Competitive Strategy
Positioning of Belleville Hotels: Service Level vs. Price (Fig. 3.14)
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Using Positioning Maps to Analyze Competitive Strategy
Positioning of Belleville Hotels: Location vs. Physical Luxury (Fig. 3.15)
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Using Positioning Maps to Analyze Competitive Strategy
Future Positioning of Belleville Hotels: Service Level vs. Price (Fig. 3.17)
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Using Positioning Maps to Analyze Competitive Strategy
Future Positioning of Belleville Hotels: Location vs. Physical Luxury
(Fig. 3.18)
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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
Positioning Maps Help Managers to
Visualize Strategy 40
Positioning Maps Help Managers to
Visualize Strategy (cont’d)
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
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Summary for Chapter 3:
Positioning Services In Competitive Markets (1)
• Effective positioning starts with the 3Cs, then segmentation, targeting and
positioning.
• Market segmentation forms the basis for focused strategies
• Service attributes that are determinant attributes are often the ones most
important to customers
• Four focus strategies:
Service focused
Fully focused
Market focused
Unfocused
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Summary for Chapter 3:
Positioning Services In Competitive Markets (2)
• Positioning distinguishes a brand from its competitors
• Segmentation, targeting and positioning integrates with
customer, competitor and company analyses to give us a
positioning statement
• To develop a positioning statement, we need
Target audience
Frame of reference
Point of difference
Reason to believe
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Summary for Chapter 3:
Positioning Services In Competitive Markets (2)
• 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 45
Overview of Chapter 4
Designing a Service Product
The Flower of Service
Facilitating Supplementary Services
Enhancing Supplementary Services
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
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What is the service product for
Starbucks?
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The Flower of Service
A core product surrounded by cluster of supplementary
services (Fig. 4.2) (1)
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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Both facilitating and enhancing services add value
to the service product 52
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
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Information to the customer – example of courier
services ; they offer document tracking
Facilitating Services – Examples of Order-Taking
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Reservations systems on the web
Facilitating Services – Examples of Billing
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Facilitating Services – Examples of Payment
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Enhancing Services – Examples of Consultation
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Enhancing Services – Examples of Hospitality
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Hospitality in retailing service
Enhancing Services – Examples of Safekeeping
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Enhancing Services – Examples of Exceptions
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Responding to customer requests
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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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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Spectrum of Branding Alternatives (Fig 4.16)
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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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Individual branding for service products
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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Service Tiering
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4.4 Branding Service Products and Experiences
Offering a Branded Experience (2)
• Four key ways to build strong brands
Dare to be different
Determine your own fame
Make an emotional connection
Internalize the brand
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Branding Service Products and Experiences
Building Brand Equity (Fig. 4.19)
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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Supplementary service innovation
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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Examples of major process innovations
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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Practice Exam Question
List and explain the five(5) of the
seven types of a „new service‟.
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Practice Exam Question : A Case Situation
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Café Rende is a small café well known among the locals for its
delicious cakes, well blended coffee and nice décor. To cater for
rising customer expectations, the owner has decided to update
her shop by painting the walls, changing the furniture and also
installing credit card payment facility because she noted that
more customers ask to pay by credit card. She also introduced,
due to popular demand, a series of cake baking classes. She also
introduced home delivery service for locations within a 3 km
radius and for purchases of more than $50.
Question for discussion:
There are seven new service development categories. Categorize
and define each of the new services introduced at Café Rende.