Jan 2012 Semester

Service Quality
MKTG 1268

Lecture Three Positioning Services in Competitive Markets Developing Service Products

(Chapters 3 and 4)

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

Chapter Three

Positioning Services in Competitive Markets

Overview of Chapter 3
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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

Focus Underlies the Search for Competitive Advantage

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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)

Standing Apart from the Competition

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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

Basic Focus Strategies for Services (Fig. 3.2)

Considerations for Using the Focus Strategies (1)

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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 (2)

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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 (3)

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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

Market Segmentation
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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

patterns Within segments, they are as similar as possible. Between segments, they are as dissimilar as possible

Consumption

Identifying and Selecting Target Segments

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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
Firms

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

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?
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Developing Right Service Concept for a Specific Segment

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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

Illustrative segmenting of a financial services market and recommended strategy

Recommended marketing strategy

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Important vs. Determinant Attributes

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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

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

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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)

Four Principles of Positioning Strategy

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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

Positionings 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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Positionings role in marketing strategy (2) 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?

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Principles of Positioning
What is value proposition for our current service products, and market segments? What customers do we serve now, and which ones would we like to target? How does each of our service products differ from competitors? How well do target customers perceive our service products as meeting their needs?

What does our firm stand for in the minds of current and potential customers?

Avoid trap of investing too heavily in points of differences that are easily copied!

What changes must we make to strengthen our competitive position?

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Developing an Effective Positioning Strategy

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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 organizations 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 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 BreadTalks 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

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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

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

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(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 Help Managers to Visualize Strategy

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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

Summary for Chapter 3: Positioning Services In Competitive Markets (1)

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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

Summary for Chapter 3: Positioning Services In Competitive Markets (2)

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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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Chapter Four

Developing SERVICE Products: Core and Supplementary Elements

Overview of Chapter 4
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Designing a Service Product The Flower of Service Branding Service Products and Experiences New Service Development

Service Product
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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

Designing a Service Concept (1)

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Core Product

Central component that supplies the principal, problem-solving benefits customers seek Augment the core product, facilitating its use and enhancing its value and appeal Used to deliver both the core product and each of the supplementary services

Supplementary Services

Delivery Processes

Designing a Service Concept (2)

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Service concept design must address the following issues: How the different service components are delivered to the customer The nature of the customers role in those processes How long delivery lasts The recommended level and style of service to be offered

Alternative service concepts for meal delivery

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Integration of Core Product, Supplementary Elements and Delivery Process (Fig. 4.3)
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The Flower of Service (Fig 4.4) (1)

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Information
Payment
Core

Consultation

Billing

Order-Taking

Exceptions
Safekeeping
KEY:

Hospitality

Facilitating elements Enhancing elements

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The Flower of Service (2)

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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

Supplementary Services (1)

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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

Supplementary Services (2)

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Enhancing

Consultation Value can be added to goods and services by offering advice and consultation tailored to each customers 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 dont go according to plan

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
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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

Service Products
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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

Product Lines And Brands

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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

A services branding model

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Spectrum of Branding Alternatives

(Fig 4.18)
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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
Club World (Business Class)

Intra-European Offerings

First (Deluxe Service)

Club Europe (Business Class) Shuttle

World Traveller Plus (Premier economy)

World Traveller Euro-Traveller (Economy)

(Economy)

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Offering a Branded Experience (1)

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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

Offering A Branded Experience (2)

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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

A Hierarchy of New Service Categories (1)

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1.

2.

3.

4.

Style changes Visible changes in service design or scripts Service improvements Modest changes in the performance of current products Supplementary service innovations Addition of new or improved facilitating or enhancing elements Process-line extensions Alternative delivery procedures

A Hierarchy of New Service Categories (2)

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5.

6.

7.

Product-line extensions Additions to current product lines Major process innovations Using new processes to deliver existing products with added benefits Major service innovations New core products for previously undefined markets

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

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Market synergy Good fit between new product and firms 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

Summary of Chapter 4: Developing Service Concepts (1)

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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

Summary of Chapter 4: Developing Service Concepts (2)

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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