SQ Lecture Three : Positioning Services & Developing Service Products (Ch 3 and 4)

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

4

© Pearson Education South Asia Pte Ltd 2013. All rights reserved


Developing a services marketing positioning strategy (Fig. 3.1)

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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

6

Conducting SWOT Analysis of the Company

7



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


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



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”



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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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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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

30 30



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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Positioning of Belleville Hotels: Location vs. Physical Luxury (Fig. 3.15)

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Future Positioning of Belleville Hotels: Service Level vs. Price (Fig. 3.17)

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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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• 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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• 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?

© Pearson Education South Asia Pte Ltd 2013. All rights reserved 50

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

70 70

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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


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.

SQ Lecture Three : Positioning Services & Developing Service Products (Ch 3 and 4)

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Transcript of SQ Lecture Three : Positioning Services & Developing Service Products (Ch 3 and 4)