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Service Competition

Section 3.3

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Service Businesses

set up solely to perform a specific service for customers

Examples of service businesses: dentists, hairstylists, video rental stores, retail clothing stores, delivery businesses etc.)

Service businesses compete with other businesses that perform the same services.

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Value-added Services

Activities performed to support the sale of a product or service. (Can be offered by a service business or non-service business)

Example a store providing free home delivery of customers’ purchases, providing free tailoring for clothing that does not fit properly

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Service businesses attempt to gain a competitive advantage using the following:

Convenience Degree of Service Selection Reputation Price

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Convenience

Making some activity easier or more comfortable

Examples; pizza companies promising delivery in 30 minutes; places installing drive-through windows; grocery stores, fitness centres etc providing 24 hour service.

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Degree of Service

The extras you add to your product or service.

A hair salon that offers the customer a coffee, tea, glass of water, while they wait.

Some service companies also compete by offering fewer value-added services. (Budget airlines, the fewer the services the lower the cost.)

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Selection Offering a greater selection Selection can be Wide, meaning that the store carries

a large number of different brands or types of merchandise.

Or Deep, meaning that the store carries

a large quantity or one specific product or type of product.

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Reputation It is important to maintain a good reputation. Word of mouth can be beneficial or harmful. First on the list of Wal-Mart negatives are its

labor practices. WalmartWatch charges that Wal-Mart is anti-union, refuses to pay its workers a decent salary, has a second-rate health plan, and sells products from sweatshops and slave labor camps in China and other Third World countries.

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Price

If all other features are equal then the company that has the lowest price will have an advantage, at least for awhile

If the price is too low, customer’s may question the business’s reputation. ($5 haircuts)

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Sections 3.4, 3.5 and 3.6

The Product/Service MixThe Competitive MarketCompeting in International Markets

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The Product/Service Mix Retail and wholesale businesses are

considered part of the service sector, because they: don’t make products or add anything to the

products they sell provide a service to the consumer by

carrying products consumers want and need provide a service to the manufacturer by

placing the products where customers can buy them

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The right product/service mix can increase sales.

Examples Universities selling sweatshirts, salons selling hair-care products, vets selling pet food etc.)

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Sec. 3.5 The Competitive Market

Every new product introduce into the market has the potential to dislodge at least one product that is already there because there is a limit to the number of consumers who use a particular type of product/service.

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The competitive market consists of

All the products or services that compete with one another for consumers money within a specific category.

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Marketing QuizChapter 3

What is an oligopoly? (1 pt) List three benefits of competition. (3pts) What is Unique Selling Proposition? (1 pt) Name three types of Non-Sustainable

Competitive Advantages. (3 pts) What is the best way to compete with

your competitors? (1 pt) What is Monopolistic Competition? (1 pt)

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Answers to Quiz An oligopoly is a small number of large companies each with

a bit of market control. Three benefits of competition:

New technology Lower prices Better quality More selection

USP- the feature or benefit a product or service that cannot be duplicated

Non-Sustainable Competitive Advantages: Promotion, Placement, Design Feature, Quality, Benefits

of Use, Price The best way to compete is to reduce your production costs. Monopolistic Competition – when there are many companies

each having the opportunity to control the market.

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Market Size & Market Share The size of the market is the amount of money

that people spent on a particular product in one year.

Market share is the percentage that one company’s product takes of the total dollars spent by consumers on products in a specific market category.

Markets are broken into market segments (ex. Juice is a segment of the beverage category, and ready-to-drink chilled fruit juice found in vending machines or store coolers is a segment of the juice market category)

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Increasing Market Share (two ways)

1. Increase the size of the overall market ( Ex. by getting people to drink more juice)

2. Take sales away from a competitor (Ex. Convincing juice drinkers of brand X to drink brand Y)

The second way is the easiest to do and marketers do it all the time trough advertising strategies, promotions, sales etc.

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Sec. 3.6Competing in International Markets

Businesses use the same methods to compete in international markets that they use in domestic markets: promotion, placement, quality, benefits of use, price and design. To be successful they must tailor their competitive efforts to fit in the foreign market.

(Wine & Dine Dinners)

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Research is the key when doing business in foreign markets

Promotion –is very challenging in international markets due to: Translations; ads, slogans, etc. may

not translate properly Sales promotion methods, such as

coupons are regulated differently More media restrictions and

censorship Religious and cultural differences (Portrayal of women)

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Placement – distribution can be an enormous challenge May contract distributors within the country set up own foreign office & hire local expert Or form partnership with foreign business

Quality – May or may not compare to the standards in another company. (cars in Europe have higher safety ratings then North American cars)

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Benefits of Use - convincing consumers that your product has more benefits then the competitor’s (see example in book, pg 114)

Price – requires specialized knowledge, must know tariff rates, must also be able to calculate landed costs

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Design - must research the legal design requirements and standards.

May have to change the size of the package

Or translate the label, instructions or other design features into one or more languages.

(Right hand driving controls for cars sold to Britain)