SM 7 CH 03 Positioning

Services Marketing
Chapter 3:
Positioning Services
in Competitive Markets
Slide 2010 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 3 Page 1
Overview of Chapter 3
Services Marketing
Focus Strategies for Services
Market Segmentation
To succeed in our over-communicated society, a

company must create a position in the prospects
mind, a position that takes into consideration not
only a companys own strengths and
weaknesses, but those of its competitors as well.
AL REIS and JACK TROUT
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
The essence of strategy is choosing to

perform activities differently than rivals do.
MICHAEL PORTER
Chapter 3 Page 2
Standing Apart from the Competition

Services Marketing
National Association for the Education of
A business must set itself apart from its
Young Children (NAEYC) Accreditation
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
George S. Day is an educator in
the field of marketing. He is the
Professor of Marketing and coDirector of the Mack Institute for
Innovation Management at the
Wharton School of the
University of Pennsylvania.
Chapter 3 Page 3
Basic Focus Strategies for Services

Services Marketing
Rentokil Initial
Business Support
Services
LRBT & SKMH
Lasik Eye Surgery &

Departmental Stores
Starbucks Coffee Shops
General Hospitals
Chapter 3 Page 4
Considerations for using Focused Strategies
Services Marketing
Fully focused: Limited range of services to narrow and specific
market
Risks
Opportunities
Developing recognized
expertise in a well-defined
niche may provide
protection against wouldbe competitors
Allows firms to charge
premium prices
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
LRBT & Shoukat Khanam
Chapter 3 Page 5
Considerations for using Focused Strategies
Services Marketing
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
Chapter 3 Page 6
Considerations for Using Focus Strategies

Services Marketing
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 cant stand for
something if you chase after
everything. ~ Al Reis and
Jack Trout (The 22 Immutable
Laws of Marketing)
Chapter 3 Page 7
Market Segmentation
Services Marketing
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
Firms ability to match or exceed competing offerings directed at
the same segment
Not just profit potential
Cannot be all things to all people
Chapter 3 Page 8
Market Segmentation
Services Marketing
Requirements for Effective Segmentation

To be useful, market segments must be:
Measurable
Accessible
Differentiable
Substantial
Actionable
Chapter 3 Page 9
Market Segmentation
Services Marketing
Exercise!
Chapter 3 Page 10

Services Marketing
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
Chapter 3 Page 11

Services Marketing
Chapter 3 Page 12

Services Marketing
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
Chapter 3 Page 13

Services Marketing
Establishing Service 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
Chapter 3 Page 14
Positioning Distinguishes a
Brand from its Competitors
Services Marketing
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
Chapter 3 Page 15
Positioning Distinguishes a
Brand from its Competitors
Services Marketing
Six Considerations for Positioning
What customers
do we serve now,
and which ones
would we like to
target?
What does our

firm stand for in
the minds of
current and
potential
customers?
What is value
proposition for
our current
service products,
and market
segments?
How does each

of our service
products differ
from
competitors?
Avoid trap of
investing too
heavily in points
of differences that
are easily copied!
How well do
target customers
perceive our
service products
as meeting their
needs?
What changes
must we make to
strengthen our
competitive
position?
Chapter 3 Page 16
Differentiation and
Positioning
Services Marketing
Choosing a Differentiation and Positioning Strategy

Identifying a set of possible competitive advantages to build a position by providing superior value from:
Product differentiation
Service differentiation
Channel differentiation
People differentiation
Image differentiation
Chapter 3 Page 17
Developing an Effective
Positioning Strategy
Services Marketing
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 organizations 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
Chapter 3 Page 18
Services Marketing
Market, Internal, and Competitive Analyses
Chapter 3 Page 19
Services Marketing
Anticipating Competitive Response

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
Chapter 3 Page 20
Using Positioning Maps to Analyze

Competitive Strategy
Services Marketing
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
Chapter 3 Page 21
Differentiation and Positioning
Services Marketing
Positioning maps
show consumer
perceptions of
their brands versus
competing
products on
important buying
dimensions
Chapter 3 Page 22
Differentiation and Positioning
Services Marketing
Chapter 3 Page 23

Services Marketing
Positioning of Hotels in Belleville: Price vs. Service Level

Expensive
Grand
Regency
PALACE
Shangri-La
High
Service
Atlantic
Moderate
Service
Sheraton
Italia
Figure 3.3 Positioning Map
of Bellevilles Principal
Business Hotels: Services
Level versus Price Level
(Before New Competition)
Castle
Alexander IV
Airport Plaza
Less Expensive
Chapter 3 Page 24

Services Marketing
High Positioning of Hotels in Belleville: Location vs. Physical Luxury Luxury
High Luxury
Regency
Grand
Shangri-La
Sheraton
PALACE
Financial
District
Shopping District
and Convention Center
Inner
Suburbs
Italia
Castle
Alexander IV
Atlantic
Figure 3.4 Positioning

Map of Bellevilles
Principal Business
Hotels: Location versus
Physical Luxury (Before
New Competition)
Moderate Luxury
Airport Plaza
Chapter 3 Page 25

Services Marketing
Positioning After New Construction: Price vs. Service Level

Mandarin
New Grand
Heritage
Marriott
Continental
Expensive
Action?
Regency
High
Service
PALACE
Shangri-La
No action?
Moderate
Service
Atlantic
Sheraton
Italia
Figure 3.5 Future
Positioning Map of
Bellevilles Principal
Business Hotels: Service
Levels versus Price Levels
Less Expensive
Castle
Alexander IV
Airport Plaza
Chapter 3 Page 26

Services Marketing
Positioning After New Construction: Location vs. Physical Luxury

High Luxury
Mandarin
New Grand
Heritage
Marriott
Sheraton
Shangri-La
Continental
Action?
Regency
PALACE
Financial
District
No action?
Castle
Figure 3.6 Future

Positioning Map of
Bellevilles Principal
Business Hotels: Location
versus Physical Luxury
Inner
Suburbs
Shopping District
and Convention Center
Italia
Alexander IV
Atlantic
Airport Plaza
Moderate Luxury
Chapter 3 Page 27

Services Marketing
Positioning Maps Help Managers to Visualize 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
Chapter 3 Page 28
Changing Competitive Positioning

Services Marketing
Repositioning
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
Chapter 3 Page 29
Summary
Services Marketing
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
Chapter 3 Page 30

SM 7 CH 03 Positioning

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Services Marketing

Slide 2010 by Lovelock & Wirtz

Services Marketing 7/e

To succeed in our over-communicated society, a

Service Attributes and Levels

Positioning Distinguishes a Brand from its

The essence of strategy is choosing to

Services Marketing 7/e

Standing Apart from the Competition

A business must set itself apart from its

Young Children (NAEYC) Accreditation

competition. To be successful it must

provider of attributes that are important

Slide 2010 by Lovelock & Wirtz

Services Marketing 7/e

Basic Focus Strategies for Services

LRBT & SKMH

Lasik Eye Surgery &

Starbucks Coffee Shops

Slide 2010 by Lovelock & Wirtz

Services Marketing 7/e

Considerations for using Focused Strategies

Market is too small to

Demand may be displaced

LRBT & Shoukat Khanam

Slide 2010 by Lovelock & Wirtz

Services Marketing 7/e

Considerations for using Focused Strategies

Services Marketing 7/e

Considerations for Using Focus Strategies

Slide 2010 by Lovelock & Wirtz

Services Marketing 7/e

The essence of marketing is

Firms vary widely in their abilities to serve different types of

Services Marketing 7/e

Requirements for Effective Segmentation

Slide 2010 by Lovelock & Wirtz

Services Marketing 7/e

Slide 2010 by Lovelock & Wirtz

Services Marketing 7/e

Service Attributes and Levels

Developing Right Service Concept for a Specific Segment

Individuals may set different priorities according to:

Purpose of using the service

Who makes decision

Whether service is used alone or with a group

Composition of that group

Slide 2010 by Lovelock & Wirtz

Services Marketing 7/e

Service Attributes and Levels

Slide 2010 by Lovelock & Wirtz

Services Marketing 7/e

Service Attributes and Levels

Important vs. Determinant Attributes

Attributes that distinguish competing services from one another

service characteristics that are important to purchasers

customers see significant differences between competing alternatives on

Slide 2010 by Lovelock & Wirtz

Services Marketing 7/e

Service Attributes and Levels

Establishing Service Levels

Can often segment customers according to willingness to trade

Services Marketing 7/e