Sm7 ch03positioning
- 1. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 1 Chapter 3: Positioning Services in Competitive Markets
- 2. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 2 Overview of Chapter 3 Focus Strategies for Services Market Segmentation Service Attributes and Levels Positioning Distinguishes a Brand from its Competitors Developing an Effective Positioning Strategy Using Positioning Maps to Analyze Competitive Strategy Changing Competitive Positioning To succeed in our over-communicated society, a company must create a position in the prospect’s mind, a position that takes into consideration not only a company’s own strengths and weaknesses, but those of its competitors as well. AL REIS and JACK TROUT The essence of strategy is choosing to perform activities differently than rivals do. MICHAEL PORTER
- 3. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 3 Standing Apart from the Competition “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.” George S. Day National Association for the Education of Young Children (NAEYC) Accreditation George S. Day is an educator in the field of marketing. He is the Professor of Marketing and co- Director of the Mack Institute for Innovation Management at the Wharton School of the University of Pennsylvania.
- 4. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 4 Basic Focus Strategies for Services LRBT & SKMH Rentokil Initial Business Support Services Lasik Eye Surgery & Starbucks Coffee ShopsDepartmental Stores General Hospitals
- 5. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 5 Considerations for using Focused Strategies 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 LRBT & Shoukat Khanam Risks Market is too small to generate needed volume Demand may be displaced by generic competition from alternative products Purchasers in chosen segment may be susceptible to economic downturn
- 6. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 6 Considerations for using Focused Strategies Market focused Narrow market segment with wide range of services Need to make sure firms have operational capability to do and deliver each of the different services selected (Actionability) Need to understand customer purchasing practices and preferences Rentokil Initial – Business Support Services 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 Lasik Eye Surgery & Starbucks Coffee Shops
- 7. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 7 Considerations for Using Focus Strategies Unfocused Broad markets with wide range of services Many service providers fall into this category Danger – becoming a “jack of all trades and master of none” Departmental Stores “The essence of marketing is narrowing the focus. You become stronger when you reduce the scope of your operations. You can’t stand for something if you chase after everything.” ~ Al Reis and Jack Trout (The 22 Immutable Laws of Marketing)
- 8. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 8 Market Segmentation Firms vary widely in their abilities to serve different types of customers A market segment is composed of a group of buyers sharing common characteristics, needs, purchasing behavior, and consumption patterns Target segments should be selected with reference to Firm’s ability to match or exceed competing offerings directed at the same segment Not just profit potential “Cannot be all things to all people”
- 9. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 9 Market Segmentation To be useful, market segments must be: Requirements for Effective Segmentation Measurable Accessible Substantial Differentiable Actionable
- 10. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 10 Market Segmentation Exercise!
- 11. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 11 Service Attributes and Levels 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
- 12. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 12 Service Attributes and Levels
- 13. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 13 Service Attributes and Levels 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 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
- 14. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 14 Service Attributes and Levels Make decisions on service levels – level of performance firm plans to offer on each attribute Easily quantified attributes are easier to understand – e.g., vehicle speed, physical dimensions Qualitative attributes subject to individual interpretation – e.g., physical comfort, noise levels Can often segment customers according to willingness to trade off price versus service level: Price-insensitive customers willing to pay relatively high price for high levels of service Price-sensitive customers look for inexpensive service with relatively low performance Establishing Service Levels
- 15. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 15 Positioning Distinguishes a Brand from its Competitors 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 people – must focus its efforts
- 16. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 16 Positioning Distinguishes a Brand from its Competitors Avoid trap of investing too heavily in points of differences that are easily copied! What does our firm stand for in the minds of current and potential customers? What customers do we serve now, and which ones would we like to target? What is value proposition for our current service products, and market segments? How does each of our service products differ from competitors’? How well do target customers perceive our service products as meeting their needs? What changes must we make to strengthen our competitive position? Six Considerations for Positioning
- 17. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 17 Differentiation and Positioning Identifying a set of possible competitive advantages to build a position by providing superior value from: Choosing a Differentiation and Positioning Strategy Product differentiation Service differentiation Channel differentiation People differentiation Image differentiation
- 18. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 18 Developing an Effective Positioning Strategy 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 organization’s 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
- 19. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 19 Developing an Effective Positioning Strategy Market, Internal, and Competitive Analyses
- 20. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 20 Developing an Effective Positioning Strategy Competitors might pursue same market position Independently do same positioning analysis and arrive at similar conclusions Threatened by new strategy, take steps to reposition own service New entrant plays “follow the leader” Conduct internal corporate analysis for challengers and analyze possible effects of alternative moves Impact of price cut on demand, market share, and profits Responses of different segments to changes in service attributes Anticipating Competitive Response
- 21. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 21 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 Information about a product can be obtained from market data, derived from ratings by representative consumers, or both
- 22. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 22 Differentiation and Positioning Positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions
- 23. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 23 Differentiation and Positioning
- 24. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 24 Using Positioning Maps to Analyze Competitive Strategy Expensive Shangri-La High Service Moderate Service Grand Regency Sheraton Italia Castle Alexander IV Airport Plaza PALACE Atlantic Less Expensive Positioning of Hotels in Belleville: Price vs. Service Level Figure 3.3 Positioning Map of Belleville’s Principal Business Hotels: Services Level versus Price Level (Before New Competition)
- 25. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 25 Using Positioning Maps to Analyze Competitive Strategy High Luxury High Positioning of Hotels in Belleville: Location vs. Physical Luxury Luxury Shopping District and Convention Center Shangri-La Moderate Luxury Financial District Inner Suburbs Grand Regency Sheraton ItaliaCastle Alexander IV Airport Plaza PALACE AtlanticFigure 3.4 Positioning Map of Belleville’s Principal Business Hotels: Location versus Physical Luxury (Before New Competition)
- 26. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 26 Using Positioning Maps to Analyze Competitive Strategy Expensive Shangri-La High Service Moderate Service Heritage Mandarin New Grand Marriott Continental Regency Sheraton Italia Alexander IV Airport Plaza PALACE Atlantic No action? Action? Less Expensive Castle Positioning After New Construction: Price vs. Service Level Figure 3.5 Future Positioning Map of Belleville’s Principal Business Hotels: Service Levels versus Price Levels
- 27. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 27 Using Positioning Maps to Analyze Competitive Strategy High Luxury Shangri-La Financial District Inner Suburbs Heritage Mandarin New Grand Marriott Continental Regency Sheraton Italia Alexander IV Airport Plaza PALACE Atlantic No action? Action? Moderate Luxury Castle Shopping District and Convention Center Positioning After New Construction: Location vs. Physical Luxury Figure 3.6 Future Positioning Map of Belleville’s Principal Business Hotels: Location versus Physical Luxury
- 28. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 28 Using Positioning Maps to Analyze Competitive Strategy Research provides input 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 Charts and maps can facilitate “visual awakening” to threats and opportunities, suggest alternative strategic directions Positioning Maps Help Managers to Visualize Strategy
- 29. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 29 Changing Competitive Positioning Firm may have to make significant change in existing position 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 Repositioning introduces new dimensions into positioning equation that other firms cannot immediately match Repositioning
- 30. Services Marketing Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 3 – Page 30 Summary Focus Strategies: Fully focused Service focused Market focused Unfocused Market Segmentation – buyers share common characteristics, needs, purchasing behavior & consumption patterns Service attributes – determinant attributes are often the ones most important to customers Positioning links: Market Analysis Internal Analysis Competitive Analysis Positioning maps are useful for plotting competitive strategy: Identify potential competitive responses Help executives to visualize strategy