Positioning Services in Competitive Markets

Dr. Doaa Adnan Abu Shariah

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Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 1
Chapter 3 Outline
LO1: Understand how the customer, competitor, and company
analysis (i.e., the 3 Cs) helps to develop a customer-driven services
marketing strategy. LO 8 Understand how
to use positioning
LO2: Know the key elements of a positioning strategy (i.e., maps to analyze and
segmentation, targeting, and positioning; STP), and explain why develop competitive
these elements are so crucial for service firms to apply
strategy.
LO3: Segment customers on needs first before using other common
bases to further identify and profile the segments. LO9 Know how to
apply positioning to
LO4:Distinguish between important and determinant attributes for digital services and
segmentation.
platform business
LO 5: Use different service levels for segmentation.
models.

LO6 Target service customers using the four focus strategies for LO10 Develop an
competitive advantage. effective positioning
strategy.
LO7 Position a service to distinguish it from its competitors.

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3.1 Customer-Driven Services Marketing
Strategy
Developing a services marketing positioning
strategy

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Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 3
3.1 Customer-Driven Services Marketing Strategy
Customer, Competitor and Company Analysis

• Customer analysis
– Overall examination of market characteristics
– Customer needs and related characteristics and behaviors

• Competitor analysis
– Current positioning
– Strengths and weaknesses

• Company analysis
– Current brand positioning and image
– Resources
– Limitations and constraints

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 3.1 Customer-Driven Services Marketing Strategy
Segmentation, Targeting and Positioning

• Segmentation
– Dividing population of possible customers into groups with common service-related
characteristics
– Similar needs within same segment, different needs between segments

• Targeting
– Choose one/more segments to focus on

• Positioning
– Unique place in the minds of customers
– Differentiation forms first step to creating unique positioning

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Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 5
 3.2 Segmenting Service Markets
Market Segmentation

• 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

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Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 6
3.2 Segmenting Service Markets
Market Segmentation

• Various ways to segment markets

– Demographics ― on its own will not result in meaningful segments
– Psychographic segmentation – useful for strengthening brand identity and creating
emotional connection
– Behavioral segmentation – focuses on observable behavior
– Needs-based segmentation – focuses on what customers truly want in a service

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 3.2 Segmenting Service Markets
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

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 3.2 Segmenting Service Markets
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

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 3.2 Segmenting Service Markets
Establishing Service Levels

• 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

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 3.2 Segmenting Service Markets
Establishing Service Levels

• 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)

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 3.3 Targeting Service Markets
Achieve Competitive Advantage through Focus

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 3.3 Targeting Service Markets
Considerations for Using the Focus Strategies (1)

• 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

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 3.3 Targeting Service Markets
Considerations for Using the Focus Strategies (2)

• 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

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Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 14
 3.3 Targeting Service Markets
Considerations for Using the Focus Strategies (3)

• 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”

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Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 15
 3.4 Positioning Services
Four Principles of Positioning Strategy

• 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

Jack Trout
• A company cannot be all things to all people - must focus its
efforts

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 3.4 Positioning Services
Six Questions for Effective Positioning Strategy

1. What does our firm currently stand for in the minds of

current and potential customers?

2. What types of customers do we serve now, and which ones

would we like to target in future?

3. What is value proposition for each of our current service

products, and what market segments is each one targeted
at?

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 3.4 Positioning Services
Six Questions for Effective Positioning Strategy

4. How does each of our service products differ from

competitors’?

5. How well do customers in chosen target segments perceive

our service products as meeting their needs?

6. What changes must we make to our offerings to strengthen

our competitive position?
Avoid trap of investing too heavily in points of
differences that are easily copied

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Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 18
 3.4 Positioning Services
Developing an Effective Positioning Strategy

• Segmentation, targeting and positioning integrates with

customer, competitor and company analyses to give us a
positioning statement

• Target audience
• Specific group(s) of people that the brand wants to sell to and serve

• Frame of reference
• Category the brand is competing in

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Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 19
 3.4 Positioning Services
Developing an Effective Positioning Strategy

• Point of difference
• Most compelling benefit offered by brand that stands out from competitors

• Reason to believe
• Proof that brand can deliver the benefits that are promised

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 3.5 Using Positioning Maps to Analyze Competitive
Strategy
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

• Also known as perceptual maps

• Information about a product can be obtained from market data, derived

from ratings by representative consumers, or both
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 3.5 Using Positioning Maps to Analyze Competitive
Strategy
Positioning of Belleville Hotels: Service Level vs. Price

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 3.5 Using Positioning Maps to Analyze Competitive
Strategy
Positioning of Belleville Hotels:
Location vs. Physical Luxury (Fig. 3.15)

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 3.5 Using Positioning Maps to Analyze Competitive
Strategy
Future Positioning of Belleville Hotels:
Service Level vs. Price (Fig. 3.17)

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Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 24
 3.5 Using Positioning Maps to Analyze Competitive
Strategy
Future Positioning of Belleville Hotels: Location vs.
Physical Luxury (Fig. 3.18)

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 3.5 Using Positioning Maps to Analyze Competitive
Strategy
Positioning Maps Help Managers to Visualize Strategy

• 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

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Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 26
 3.5 Using Positioning Maps to Analyze Competitive
Strategy
Positioning Maps Help Managers to Visualize Strategy

• 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

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Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 27
 Summary for Chapter 3:
Positioning Services In Competitive Markets (1)

• Effective positioning starts with the 3Cs, then segmentation,

targeting and positioning.

• Market segmentation forms the basis for focused strategies

• Service attributes that are determinant attributes are often

the ones most important to customers

• Four focus strategies:

• Service focused

• Fully focused

• Market focused

• Unfocused

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Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 28
 Summary for Chapter 3:
Positioning Services In Competitive Markets (2)

• Positioning distinguishes a brand from its competitors

• Segmentation, targeting and positioning integrates with

customer, competitor and company analyses to give us a
positioning statement

• To develop a positioning statement, we need

• Target audience

• Frame of reference

• Point of difference

• Reason to believe

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Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 29
 Summary for Chapter 3:
Positioning Services In Competitive Markets (2)

• Positioning maps are useful for plotting competitive strategy

• Mapping future scenarios help identify potential competitive responses

• Positioning charts help visualization of strategy

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