Positioning Services in Compititive Markets

Positioning Services in Competitive Markets
Slide 2004 by Christopher Lovelock and Jochen Wirtz
Services Marketing 5/E
7- 1
Focus Underlies the Search for Competitive Advantage
Intensifying competition makes it important to

differentiate products
In mature market, only way to grow may be to

take a share from competitors
Must be selective in targeting customers
Rather than compete in an entire market, firm

must focus efforts on customers it can serve best
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E
7- 2
Basic Focus Strategies for Services

(Fig 7.1)
BREADTH OF SERVICE OFFERINGS Narrow

Many
Wide
NUMBER OF MARKET S SERVED
Service Unfocus Focused ed Fully Focused

Market Focused
Few
Source: Robert Johnston Achieving Focus in Service Organizations, The Service Industries Journal, Vol. 16, January 1996, pp. 10 20
7- 3
Risks and Opportunities of a Fully Focused Strategy
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
7- 4
Market Segmentation Forms the Basis for Focused Strategies
7- 5
Market Segmentation
Firms vary widely in ability to serve different types of customers

Adopt strategy of market segmentation, identifying those parts of
market that can be served best A market segment is composed of a group of buyers sharing common:
Characteristics Needs Purchasing behavior Consumption patterns

Market and Micro Segmentation
Micro segmentation strategies target small groups of customers sharing certain relevant characteristics at a specific
7- 6
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 opportunities
Must analyze market to determine which segments offer better

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
For example: Banco Azteca in Mexico (Service Perspectives 7.2)
7- 7
Service Attributes and Levels
7- 8
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
7- 9
Important versus 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
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

7 - 10
Establishing Service Levels and Tiers
Need to make decisions on service levelslevel of

performance firm plans to offer on each attribute
Easily quantified attributes are easier to understand and
generalizablee.g., vehicle speed, physical dimensions Qualitative attributes are ambiguous and subject to individual interpretatione.g., physical comfort, noise levels
Can often segment customers according to willingness to

trade off price versus service level
Service tiering: Positioning strategy based on offering

several price-based classes of service concept
software support etc.
Packaging a distinctive level of service across many attributes Common in hotels, airlines, car rentals, computer hardware, and
7 - 11
Positioning Distinguishes a Brand from Its Competitors
7 - 12
Four Principles of Positioning Strategy
Must establish position for firm or product in minds of customers Position should be distinctive, providing one simple, consistent message
Position must set firm/product apart from competitors

A company cannot be all things to all peoplemust Jack Trout focus its efforts
7 - 13
Principles of Positioning
What does our firm currently stand for in the minds of current and
prospective customers? target in the future? service offerings?
What customers do we serve now, and which ones would we like to

What is value proposition and target segment for each of our current How do our service offerings differ from competitors? 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
7 - 14
Product Positioning versus Copy Positioning
Positioning often associated with communication mix, notably

advertising, promotion, PR
Copy Positioninguse of advertising to create images and
associations for broadly similar branded products to sharpen distinctions in customer's mind
Use of imagery to differentiate and add glamour to services Some slogans promise a specific benefit to make company stand out
from competitors
Growing number of firms engage in co-branding, for example:

Jointly offered credit card by American Airlines, Citibank, and Visa Citizen Bank branches in Stop & Shop supermarket chain
Positioning guides firm to marketing strategy development

7 - 15
A Passion For the Business of Accounting at Grant Thornton
Highest Performance
Among Audit Firms Serving Companies with up to $12 billion in Annual Revenue award
Links passion for

accounting to high client satisfaction with its auditing services
Find out how it feels to

work with people who love what they do!
Source: Grant Thornton, LLP.
7 - 16
Slogans Used by Companies

Invest with confidence
T. Rowe Price
Shopping online beats standing in line

Lands End
We never stop working for you

Verizon
Relax, Its FedEx

FedEx Ground
7 - 17
Positioning as a Diagnostic Tool (1)

Table 7.2
Positioning links market analysis and competitive analysis to

internal corporate analysis
Understand relationships between products and markets

Compare to competition on specific attributes Evaluate products ability to meet consumer needs/expectations Predict demand at specific prices/performance levels
7 - 18
Positioning as a Diagnostic Tool (2)

Table 7.2
Identify market opportunities

Introduce new products Redesign existing products Eliminate non-performing products
Make marketing mix decisions, respond to competition

Distribution/service delivery Pricing Communication
7 - 19
Role of Positioning in Marketing Strategy
Positioning links market analysis and competitive analysis to

internal corporate analysis
Positioning strategy can take place at different levels

Multi-site, multi-product business: Position may be established for
entire organization, given service outlet or specific service outlet Consistency among services offered at same location because the image of one may spill over to others
Help prospective customers get mental fix on what to expect Failure to select desired position in marketplace and develop a
marketing action plan to hold this position may result in:
Head-on competition from a stronger competitor Being pushed into a position that nobody else wants Organizations position being so blurred that nobody knows what its
distinctive competence really is

7 - 20
Market, Internal, and Competitor Analysis

(Fig 7.3)
MARKET ANALYSIS
- Size
- Composition - Location - Trends
Define, Analyze Market Segments Select Target Segments To Serve Articulate Desired Position in Market Select Benefits to Emphasize to Customers
INTERNAL ANALYSIS
- Resources
- Reputation - Constraints - Values
Marketing Action Plan
COMPETITOR ANALYSIS
- Strengths
- Weaknesses - Current Positioning
Analyze Possibilities for Differentiation
Source: Developed from an earlier schematic by Michael R. Pearce
7 - 21
Anticipating Competitive Response
Competitors might pursue same market position

Independently do same positioning analysis and arrive at similar
Get inside competitors headsconduct internal

analysis for all current/potential challengers how they might act
conclusions Threatened by new strategy, take steps to reposition own service New entrant plays follow the leader and offer higher service level, more attributes, and/or a lower price
corporate to get sense of
Analyze possible effects of alternative competitive moves

Impact of price cut on demand, market share, and profits Responses of different segments to changes in service attributes
7 - 22
Positioning Maps
7 - 23
Using Positioning Maps to Plot Competitive Strategy
Useful way to represent consumer perceptions of alternative

products in visual format
Typically confined to two attributes, but 3-D models can be used to

portray positions on three attributes simultaneously
Information about a product can be obtained from market data,

derived from ratings by representative consumers, or both.
If consumer perceptions of service characteristics differ sharply

from "reality" as defined by management, then marketing efforts may be needed to change these perceptions
Also known as perceptual maps

7 - 24
Positioning of Hotels in Belleville: Price versus Service Level (Fig 7.4)
Expensive
Grand
Regency
PALACE
Shangri-La
High Service Sheraton Atlantic Moderate Service
Italia Castle Alexander IV Airport Plaza Less Expensive

7 - 25
Positioning of Hotels in Belleville: Location versus Physical Luxury (Fig 7.5)

High Luxury
Grand Sheraton PALACE

Financial District Shopping District and Convention Center
Regency
Shangri-La
Inner Suburbs
Castle Atlantic
Italia
Alexander IV
Airport Plaza Moderate Luxury
7 - 26
Positioning Maps Help Managers to Visualize Strategy
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
7 - 27
Changing Competitive Positioning
7 - 28
Repositioning
Positions evolve in response to changing market structures,

technology, competitive activity, and the nature of firm itself position
Firm may have to make significant change in existing

Revising service characteristics; redefining target market segments;
abandoning certain products; withdrawing from certain market segments
Improving negative brand perceptions may require extensive

redesign of core product
Island Trust
Weaknesses may be perceptual rather than realfor example: Long
Repositioning introduces new dimensions into positioning

equation that other firms cannot immediately match
Services Marketing 5/E Slide 2004 by Christopher Lovelock and Jochen Wirtz
7 - 29
Changing Perceptions through Advertising: Long Island Trust
Increased competition among banks in New York state after

change in banking laws led to opening of new branches
Long Island Trust rated below other banks on branch
availability, full range of offerings, service quality etc., but #1 on helping residents and economy of Long Island (suburban New York City) improve perceptions of attributes rated less favorably
Advertising played to perceived strengths rather than trying to

Why send your money to a city if you live on the Island? It makes
sense to keep your money to close to homewe concentrate on developing Long Island The city is a great place to visit, but would you want to bank there? Perceived strength of being a Long Island bank for Long Islanders had a positive halo effect on other attributes
7 - 30
Summary for Chapter 7: 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 Service positioning requires service tiering
7 - 31

Positioning distinguishes a brand from its competitors
Product positioning Copy positioning
Service positioning can be used as a diagnostic tool 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
7 - 32

Positioning maps are useful for plotting competitive strategy
Mapping future scenarios help identify potential competitive responses Positioning charts help visualization of strategy
Changing competitive positioning can be achieved through advertising and innovation
7 - 33
Applying the Flow Model of Distribution to Services

Distribution embraced three interrelated elements
Information and promotion flow Negotiation flow Product flow
7 - 34
Options for Service Delivery

There are 3 types of interactions between customers and service firms
Customer goes to the service provider (or intermediary) Service provider goes to the customer Interaction at arms length (via the Internet, telephone, fax,
mail, etc.)
7 - 35
Method of Service Delivery (Table 7.1)

Availability of Service Outlets Nature of Interaction Single Site Multiple Sites between Customer and Service Organization
Customer goes to service organization
Service organization goes to customer

Customer and service organization transact at arms length
Theater Barbershop House painting Mobile car wash Credit card company Local TV station
Bus service Fast-food chain Mail delivery Auto club road service Broadcast network Telephone company
7 - 36
Place vs. Cyberspace

Place - customers and
Required for people processing services suppliers meet in a physical Offers live experiences, social environment interaction, e.g., food services More emphasis on eye-catching servicescape, entertainment
Cyberspace - customers
and suppliers do business electronically in virtual environment created by phone/internet linkages
Ideal for info-based services Saves time Facilitates information gathering May use express logistics service to deliver physical core products
7 - 37
24/7 - Factors Encouraging Extended Operating Hours (Mgt Memo 7.1)
Economic pressure from consumers Changes in legislation
Economic incentives to improve asset utilization

Availability of employees to work nights, weekends Automated self-service
7 - 38
Technology Revolutionizes Service Delivery: Some Examples
Smart mobile telephones to link users to Internet Voice recognition software Automated kiosks for self-service (e.g. bank ATMs) Web sites
provide information take orders and accept payment deliver information-based services
Smart cards that can act as electronic wallets
7 - 39
E-Commerce: Factors that Attract Customers to Virtual Stores
Convenience (24-hour availability, save time, effort)

Ease of obtaining information on-line and searching for
desired items
Better prices than in bricks-and-mortar stores

Broad selection
7 - 40
Franchising
Franchising is a fast growth strategy, when
Resources are limited Long-term commitment of store managers is crucial Local knowledge is important Fast growth is necessary to pre-empt competition
7 - 41
Service Process and Market Entry
People Processing Services

Export the service concept Import customers Transport customers to new locations
Possession Processing Services

Most require an ongoing local presence, whether it is the
customers dropping off items or personnel visiting customer sites
Information Based Services

Export the service to a local service factory Import customers Export the information via telecommunications and transform it
locally
7 - 42
Barriers to International Trade in Services
Operating successfully in international markets remains

difficult for certain services despite efforts of the WTO and control relaxations
Barriers include
Refusal by immigration offices to issue work permits Heavy taxes on foreign firms Domestic preference policies Legal restrictions Lack of broadly-agreed accounting standards Cultural differences (esp. for entertainment industry)
7 - 43
Forces for Internationalization
Market drivers Competition drivers Technology drivers Cost drivers Government drivers Impact will vary by service type (people, possessions, information)
7 - 44
Modes of Internationalization
Export information-based services

transmit via electronic channels store in physical media, ship as merchandise
Use third parties to market/deliver service concept

licensing agents brokers franchising alliance partners minority joint ventures
Control service enterprise abroad

direct investment in new business buyout of existing business
7 - 45
Impact of Globalization Drivers on Different Service Categories (Table 7.2)
Globalization Drivers Competition
People Processing
Simultaneity of production and consumption limits leverage of foreign competitive advantage, but management systems can be globalized People differ economically and culturally, so needs for service and ability to pay may vary.
Possession Processing
Technology drives globalization of competitors with technical edge.
Information Based
Highly vulnerable to global dominance by competitors with monopoly or competitive advantage in information. Demand for many services is derived to a significant degree from economic and educational levels.
Market
Level of economic developments impacts demand for services to individually owned goods
7 - 46
Impact of Globalization Drivers on Different Service Categories (Table 7.2, contd)

Globalization People Drivers Processing Use of IT for delivery of Technology Possession Processing
Need for technologybased service delivery systems depends on possessions requiring service and the cost trade-offs in labor substitution Variable labor rates may favor low-cost locations. Policies may decrease/increase cost & encourage/discourage certain activities
Information Based
Ability to deliver core services through remote terminals may be a function of investment in computerization etc. Major cost elements can be centralized & minor cost elements localized. Policies may impact demand and supply and distort pricing
supplementary services may be a function of ownership and familiarity with technology.
Cost
Variable labor rates may impact on pricing in labor-sensitive services. Social policies (e.g., health) vary widely and may affect labor cost etc.
Government
7 - 47

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Positioning Services in Competitive Markets

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Focus Underlies the Search for Competitive Advantage

Intensifying competition makes it important to

In mature market, only way to grow may be to

Must be selective in targeting customers

Rather than compete in an entire market, firm

Basic Focus Strategies for Services

BREADTH OF SERVICE OFFERINGS Narrow

NUMBER OF MARKET S SERVED

Service Unfocus Focused ed Fully Focused

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Risks and Opportunities of a Fully Focused Strategy

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Market Segmentation Forms the Basis for Focused Strategies

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Firms vary widely in ability to serve different types of customers

Characteristics Needs Purchasing behavior Consumption patterns

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Identifying and Selecting Target Segments

A target segment is one that a firm has selected from among

Must analyze market to determine which segments offer better

segment Not just profit potential

Some underserved segments can be huge, especially poor

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Service Attributes and Levels

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Developing Right Service Concept for a Specific Segment

Use research to identify and prioritize which

Individuals may set different priorities

Important versus Determinant Attributes

Consumers usually choose between alternative

Attributes that distinguish competing services from

Determinant attributes determine buyers choices

competing alternatives on these attributes

Establishing Service Levels and Tiers

Need to make decisions on service levelslevel of

Can often segment customers according to willingness to

Service tiering: Positioning strategy based on offering

Positioning Distinguishes a Brand from Its Competitors

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Four Principles of Positioning Strategy

Position must set firm/product apart from competitors

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

What customers do we serve now, and which ones would we like to

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Product Positioning versus Copy Positioning

Positioning often associated with communication mix, notably

Copy Positioninguse of advertising to create images and

Growing number of firms engage in co-branding, for example:

Positioning guides firm to marketing strategy development

A Passion For the Business of Accounting at Grant Thornton

Links passion for

Find out how it feels to