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Module 1: Understanding Consumers and Market

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Positioning Services in Competitive Markets - Part 1

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MODULE OVERVIEW

Understand how the customer, competitor and company analysis (i.e., the 3 ‘C’s) helps to develop a customer-driven services marketing strategy.
Know the key elements of a positioning strategy (i.e., STP), and explain why these elements are so crucial for service firms to apply.
Segment customers on needs first before using other common bases to further identify and profile the segments.
Distinguish between important and determinant attributes for segmentation.
Use different service levels for segmentation.

INTRODUCTION

As competition intensifies in the service sector, it is becoming ever more important for service organizations to differentiate their
products in ways that are meaningful to customers.
How do customers make decisions about buying and using a service?
What makes consumers or institutional buyers select — and remain loyal to — one supplier over another?

CUSTOMER-DRIVEN SERVICES MARKETING STRATEGY

Without knowing which product features are of specific interest to customers, it is hard for managers to develop an appropriate stratergy. 
In a highly competitive environment, there is a risk that customers will perceive little real difference between competing alternatives.
Therefore customers make their choices based on who offers the lowest price.
Managers need to think systematically about all aspects of the service offering.
And they need to emphasize competitive advantage on attributes that will be valued by customers in their target segment(s).
This typically begins with an analysis of customers, competitors and the company, collectively often referred to as the 3 ‘C’s.
This analysis helps a firm to determine the services positioning Strategy, which are segmentation, targeting and positioning,
frequently called STP by marketing experts.

CUSTOMER, COMPETETIOR AND COMPANY ANALYSIS (3 ‘C’S)
Customer Analysis
Market Analysis

Establish attractiveness of overall market and potential segments within.
Look at overall size and growth of market, margins and profit are potential, and demand levels and trends affecting the market.
Is demand increasing or decreasing for the benefits offered by a particular type of service?
Are certain segments of the market growing faster than others?

Customer Needs Analysis

Who are the customers in that market in terms of demographics and psychographics?
What needs or problems do they have?
Are there potentially different groups of customers with differing needs that require different service products or different levels of service?
What are the benefits of the service each of these groups values most?
For example, in the travel industry, the wealthy retirees may value comfort and safety most and are much less price sensitive compared to young families.

Competitor Analysis

Identification and analysis of competitors.
Analysis of competitors’ strengths and weaknesses.
Understanding opportunities for differentiation and competitive advantage. Goal is to enable managers to decide which benefits could be emphasized to which target segment.

Company Analysis

Also known as internal corporate analysis.
Company analysis helps in identifying the organization’s strengths.
Strength in terms of its current brand positioning and image.
Strength in terms of the resources the organization has (financial, human labor and know-how, and physical assets). Company analysis helps in understanding the organization’s limitations or constraints.
And how its values shape the way it does business.
Using insights from this analysis, management can select a limited number of target market segments.
That can be served with either existing or new services.
The core question is: How well can our company and our services address the needs and problems faced by each customer segment?

SEGMENTATION, TARGETING AND POSITIONING (STP)
Segmentation:

A market segment is composed of a group of buyers who share common characteristics, needs, purchasing behavior, and/or consumption patterns.
Grouping based on demographic, geographic, psychographic and behavioral variables.
Customers in the same segment should have as similar needs as possible, but between segments, their needs should be as different as possible.

Targeting:

After segmentation the firm has to assess the attractiveness of each segment.
And decide which segment(s) would most likely be interested in its service, and focus on how to serve them well.

Positioning:

The unique place that the firm and/or its service offerings occupy in the minds of its consumers.
Differentiation is the first step towards creating a unique positioning for a service.

SEGMENTING SERVICE MARKETS
Segmentation Bases
Demographic segmentation

Based on age, gender and income etc.
Example: Bank Al Habib targets senior citizens, The Makeup Genius app by L'Oreal targets women.
However, two people in the exact same demographics can exhibit very different Fill buying behaviors (e.g., not all 20-year-old
middle-class males feel and behave the same way).

Psychographic segmentation

People’s lifestyles, attitudes and aspirations.
Very useful in strengthening brand identity and creating an emotional connection with the brand.
But may not necessarily map to behaviors and sales.

Behavioral segmentation

Behavioral segmentation addresses the shortcoming of not being able to map behaviors as it focuses on observable behaviors, such as people being non-users,light users, or heavy users.

Needs-based segmentation

Focuses on what customers truly want in a service and maps closely to the multi-attribute decision models which was discussed earlier.
Example: a time and quality sensitive segment versus a price-sensitive segment.
The timing of use (time of day/week/season).
Whether the individual is using the service alone or with a group, and if the latter, the composition of that group.

IMPORTANT VERSUS DETERMINANT SERVICE
ATTRIBUTES
Important Attributes

Consumers usually make their choices among alternative service offerings on the basis of perceived differences between them.
However, the attributes that distinguish competing services from one another may not always be the most important ones.
For instance, many travellers rank “safety” as a very important attribute in their choice of an airline and avoid travelling on airlines with Care or safety reputation.
However, after eliminating such alternatives from consideration, a traveller flying on major routes is still likely to have several choices of carriers available that are perceived as equally safe.
Hence, safety is not usually an attribute that influences the customer’s choice at this point

Determinant attributes

Those that actually determine buyers’ choices between competing alternatives.
Are often lower on the list of service characteristics important to purchasers.
However, they are the attributes where customers see significant differences among competing alternatives.

SEGMENTATION BASED ON SERVICE LEVELS
Some service attributes are easily quantified, while others are qualitative.
Quantitative Aspects:

Price, for instance, is a quantitative attribute.
Punctuality of transport services can be expressed in terms of the percentage of trains, buses, or flights arriving within a specified number of minutes from the scheduled time.

Qualitative Aspects:

Quality of personal service.
A hotel's degree of luxury.
Qualitative aspects are subject to individual interpretation
g.,- If customers say they value physical comfort
What does that mean for a hotel? ambient conditions or tangible elements such as the bed

CONCLUSION

This module helped us to understand how the customer, competitor and company analysis (i.e., the 3 ‘C’s) helps to develop a customer-driven services marketing strategy.
We learnt key elements of a positioning strategy (i.e., STP), and why these elements are so crucial for service firms to apply.
We tried to understand the difference between important and determinant attributes for segmentation, and different service of on levels for segmentation.