SQ Lecture Three : Positioning Services & Developing Service Products (Ch 3 and 4)
1. JAN 2013 Semester
1
Service Quality
MKTG 1268
Lecture Three
• Positioning Services in
Competitive Markets
(Chapter 3)
• Developing Service
Products (Chapter 4)
2. This lecture:
2
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
3. 3 Chapter Three
Positioning Services in Competitive Markets
4. Overview of Chapter 3
4
Customer-Driven Services Marketing Strategy
Segmenting Service Markets
Targeting Service Markets
Positioning Services
Using Positioning Maps to Analyze Competitive
Strategy
10. Market Segmentation
10
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
12. Developing Right Service Concept for a
Specific Segment
12
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
14. Important vs. Determinant Attributes
14
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
15. Important vs. Determinant Attributes
15
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
Servicecharacteristics that are important to purchasers
Customers see significant differences between
competing alternatives on these attributes
17. Establishing Service Levels
17
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
18. Establishing Service Levels
18
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)
19. Capsule Hotels (what type of customer and what are
their service expectations? (read Service Insight 3.2)
19
21. Considerations for Using the
Focus Strategies (1)
21
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
22. Example of a fully focused strategy – private air
charter for VIPs
22
23. Considerations for Using the
Focus Strategies (2)
23
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
25. Considerations for Using the
Focus Strategies (3)
25
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”
26. Four Principles of Positioning Strategy
26
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
33. Using Positioning Maps to Analyze
Competitive Strategy
33
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
40. Positioning Maps Help Managers to
Visualize Strategy
40
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
41. Positioning Maps Help Managers to
Visualize Strategy (cont’d)
41
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
45. 45 Chapter Four
Developing SERVICE Products: Core and
Supplementary Elements
46. Overview of Chapter 4
46
Designing a Service Product
The Flower of Service
Facilitating Supplementary Services
Enhancing Supplementary Services
Branding Service Products and
Experiences
New Service Development
47. Service Product
47
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
48. Designing a Service Concept (1)
48
Core Product
Centralcomponent that supplies the
principal, problem-solving benefits customers
seek
Supplementary Services
Augmentthe core product, facilitating its use
and enhancing its value and appeal
51. The Flower of Service (2)
51
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
53. Supplementary Services (1)
53
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
54. Supplementary Services (2)
54
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
67. Managerial Implications
67
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
68. Product Lines And Brands
68
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
70. Example: British Airways Sub-brands
British Airways offers seven distinct air travel products
Intercontinental Offerings Intra-European
Offerings
Club World
First (Deluxe Club Europe
(Business
Service) (Business
Class)
Class)
Shuttle
World World
Traveller Plus Traveller Euro-Traveller
(Premier (Economy) (Economy)
economy)
70
70
72. Offering a Branded Experience (1)
72
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
76. A Hierarchy of New Service Categories (1)
76
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
78. A Hierarchy of New Service Categories (2)
78
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
80. 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
80
81. Success Factors in New Service Development
81
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
82. Summary of Chapter 4: Developing Service Concepts (1)
82
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
83. Summary of Chapter 4: Developing Service Concepts (2)
83
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
85. Practice Exam Question : A Case Situation
85
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.
