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Module 1: Understanding Consumers and Market

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Positioning Services in Competitive Markets - Part 2

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MODULE OVERVIEW

Target service customers using the four focus strategies for competitive advantage.
Position a service to distinguish it from its competitors.
Understand how to use positioning maps to analyze and develop competitive strategy.
Develop an effective positioning strategy.

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

TARGETING SERVICE MARKETS

Service firms vary widely in their abilities to serve different types of customers well.
Hence companies focus their efforts on those customers they can serve best — the target segment.
Focus- In marketing terms, focus means providing a relatively narrow product mix for a particular target segment.
Service firms identify the strategically important elements in their service operations and concentrate their resources on them.
The extent of a company’s focus can be described along two dimensions: market focus and service focus.

CUSTOMER-DRIVEN SERVICES MARKETING STRATEGY

Market focus is the extent to which a firm serves few or many markets.
Service focus describes the extent to which a firm offers few or many services.
These two dimensions define the four basic focus strategies.

BASIC FOCUS STRATEGIES FOR SERVICES

Fully-focused: A fully-focused organization provides a limited range of services (perhaps just a single core product) to a narrow and specific market segment.
For example, private jet charter services may focus on high-net-worth individuals or corporations.
Developing recognized expertise in a well-defined niche may provide protection against would-be competitors and allows a firm to charge premium prices.
An example of a fully focused firm is Shouldice Hospital.
The hospital performs only a single surgery (hernia) on otherwise healthy patients (mostly men in their 40s to 60s).
Because of their focus, their surgery and service Quality are superb.
There are key risks associated with pursuing the fully-focused strategy.

The market may be too small to get the volume of business needed for financial success.
The firm is vulnerable should new alternative products or technologies substitute their own.


Market-focused- In a market-focused strategy, a company offers a wide range of services to a narrowly defined target segment.
K based Rentokil Initial, a provider of business to business services, has profited from the growing trend in outsourcing of
services related to facilities maintenance.
Which has enabled it to develop a large range of services for its clients.
However, before choosing a market-focused strategy, managers need to be sure their firms are capable of delivering each of the different services selected.
Service-focused- Service focused firms offer a narrow range of services to a fairly broad market.
Starbucks coffee shops follow this strategy, serving a broad customer base with a largely standardized product.
Other examples (e.g., Lasik eye surgery clinics, or LinkedIn)
Unfocused- Many service providers fall into the unfocused category, because they try to serve broad markets and provide a wide range of services.
The danger with this strategy is that unfocused firms often are “jacks of all trades and masters of none”.
Public utilities and government agencies fall into this category.
Other example may include some departmental stores.

PRINCIPLES OF POSITIONING SERVICES

Positioning strategy — ls concerned with creating, communicating and maintaining distinctive differences that will be noticed and valued by the customers.
Successful positioning requires managers to understand their target customers’ preferences, their conception of value, and the characteristics of their competitors’ offerings.

Positioning Principles (Jack Trout ):

A company must establish a position in the minds of its targeted customers.
The position should be singular, providing one simple and consistent message .
The position must set a company apart from its competitors.
A company cannot be all things to all people
it must focus its efforts.

The concept of positioning provides specific answers to the following six questions:

What does our firm currently stand for in the minds of current and potential customers?
What customers do we serve now, and which ones would we like to target in the future?
What is the value proposition for each of our current service offerings, and what market Segments is each one targeted at?

One of the challenges in developing a viable positioning strategy is to avoid the trap of investing too much in points of difference that can easily be copied.
As researchers Kevin Keller, Brian Sternthal, and Alice Tybout note: “Positioning needs to keep competitors out, not draw them in”.
USING POSITIONING MAPS TO PLOT COMPETITIVE STRATEGY

Positioning maps are tools to visualize competitive positioning along key aspects of its services marketing strategy.

to map developments over time, and to develop scenarios of potential competitor responses.


Developing a positioning map — a task sometimes referred to as perceptual mapping — is a useful way of representing consumers perceptions of alternative products graphically.

EXAMPLE OF A POSITIONING MAP

A map usually has two attributes, although three-dimensional models can be used to show three of these attributes.
The hotel business is highly competitive, especially during seasons when the supply of rooms exceeds demand.
The degree of luxury and comfort in physical amenities will be one choice criterion.
Others may include attributes like location, safety, availability of meeting rooms and a business centre, restaurants, a swimming pool and gym, and loyalty programs for frequent guests.
Let's look at an example, based on a real-world situation of how to apply positioning maps.
Managers of The Palace, a successful four-star hotel, developed a positioning map showing their own and competing hotels, to get a better understanding of future threats to their established market position in a large city that we will call Belleville.
Its competitors included eight four-star establishments, and The Grand, one of the city’s oldest hotels, which had a five-star rating.
To better understand the nature of the competitive threat, the hotel’s management team worked with a consultant to prepare
charts that displayed The Palace's position in the business traveller market both before and after the entrance of new competition.
Four key attributes were selected for study: room price, level of personal service, level of physical luxury, and location.

DEVELOPING AN EFFECTIVE POSITIONING STRATEGY

Point of difference — the most compelling benefit offered by the brand that stands out from its competition.
Example- (LinkedIn)

The largest network of professionals and recruiters to help advance your career.
Develop your business acumen, industry knowledge, and personal development.


The outcome of integrating the 3 Cs and the STP analyses is the positioning statement.
Positioning statement defines the desired position of the organization in the marketplace.

CONCLUSION

In this module we learnt how four focus strategies are used to gain competitive advantage.
How we can distinguish a service from its competitors through positioning.
We learnt how to use positioning maps to analyze and develop competitive strategy.
We also learnt how to develop an effective positioning strategy.