sm lecture 2 - service strategy positioning online

7/28/2019 Sm Lecture 2 - Service Strategy Positioning Online

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Service Mix Strategy& Positioning


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SERVICE MIX STRATEGY & POSITIONING

The Expanded Marketing Mix Required forServices

Service Focus Strategies

Service Positioning


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Expanded Marketing Mixfor Services


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Expanded Marketing Mix for Services

PRODUCT PLACE PROMOTION PRICEPhysical goodfeatures

Channel type Promotionblend

Flexibility

Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms

Packaging Outlet location Salespromotion

Differentiation

Warranties Transportation Publicity Allowances

Product lines Storage

Branding


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Services RequireAn Expanded Marketing Mix

Marketing can be viewed as: A strategic and competitive thrust pursued by top management

A set of functional activities performed by line managers

A customer-driven orientation for the entire organization

Marketing is the only function to bring operatingrevenues into a business; all other functions are costcenters

The 7Ps of services marketing are needed to createviable strategies for meeting customer needs profitablyin a competitive marketplace


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The Marketing Mix


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The Marketing Mix

The tools available to a business to gain the reaction it is seekingfrom its target market in relation to its marketing objectives

7Ps Price, Product, Promotion, Place, People, Process, PhysicalEnvironment

Traditional 4Ps extended to encompass growth of service industry


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Product


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THE SERVICE PRODUCT

A service product comprises all elements ofservice performance, both tangible andintangible, that create value for customers

The service concept is represented by:

A core product

Accompanied by supplementary services

Objective:To offer value to target customers

To satisfy their needs better than competingalternatives


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Core Products andSupplementary Services

Core Product

Central component that supplies the principal,problem-solving benefits customers seek

Supplementary services help to differentiate coreproducts and create competitive advantage by:

Facilitating use of core product

(a service or a good)

Enhancing the value and appeal

of the core product


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The Flower of Service

Core

Information

Consultation

Order Taking

Hospitality

Payment

Billing

Exceptions

Safekeeping

Facilitating elementsEnhancing elements

KEY:


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Core and Supplementary Services at Luxury Hotel(Offering Much More than Cheap Motel!)

ReservationValet

Parking

Reception

BaggageService

CocktailBar

RestaurantEntertainment/

Sports/Exercise

Internet

Wake-upCall

RoomService

Business

Center

Cashier

A Bed for theNight in an

Elegant PrivateRoom with a

Bathroom


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Price


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Pricing objectives can includeGenerating revenues and profit (financial institutions)Building demand (Game shows online)Developing user base (new internet caf)

Three main foundations to pricing a service

Cost-based pricingCompetition-based pricingValue-based pricing

The 7Ps of Services Marketing:Price and Other User Outlays


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Cost-based pricing seeks to recover costs plus a marginfor profit; includes both traditional and activity-basedcosting

What basis for pricing? (How define unit of service?)

Completing a task

Admission to a service performance

Time based

Monetary value of service delivered (e.g.commission)

Consumption of physical resources (e.g.food andbeverages)



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Firm must be aware of competitive pricing but maybe harder to compare for services than for goods

Value-based pricing should reflect net benefits tocustomer after deducting all costs

Additional monetary costs associated with service usage(e.g., travel to service location, parking, phone,babysitting, etc.)

Time expenditures, especially waiting

Unwanted mental and physical effort

Negative sensory experiences


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Promotion


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The 7Ps of Services Marketing:Promotion & Education

Informing, educating, persuading, remindingcustomers

Marketing communication tools

Media elements (print, broadcast, outdoor,retail, the Internet, etc.)

Personal selling, customer service

Sales promotion

Publicity/PR

Imagery and recognition

Branding

Corporate design


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Marketing Communications Mixfor Services (1)

Key: * Denotes communications originating from outside the organization

Word-of-mouth

(other customers)

Personalcommunications

Selling

Customerservice

Training

Advertising

Broadcast,

podcasts

Print

Internet

Outdoor

Direct mail

Sales promotion

Sampling

Coupons

Sign-up

rebates

Gifts

Prize

promotions

Telemarketing

Word of

mouth*


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Key: * Denotes communications originating from outside the organization

Publicity &public relations

Pressreleases/kits

Websites

Manuals

Brochures

Interactivesoftware

Voice mail

Signage

Interior decor

Vehicles

Equipment

Stationery

UniformsMedia-initiated

coverage*

Marketing Communications Mixfor Services (2)

Press

conferences

Sponsorship

Special Events

Trade Shows,exhibitions

Instructionalmanuals Corporate design


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Place


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The 7Ps of Services Marketing:Place & Time

Delivery decisions: Where, When, How

Geographic locations served

Service schedules

Physical channels

Electronic channels

Customer control and convenience

Channel partners/intermediaries


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Applying the Flow Model ofDistribution to Services

Distribution embraces three interrelated elements:

Information and promotion flow

To get customer interested in buying the service

Negotiation flow

To sell the right to use a service

Product flow

To develop a network of local sites


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Distribution Options forServing Customers

Customers visit service site

Convenience of service factory locations and operational schedulesimportant when customer has to be physically present

Service providers go to customers

More expensive and time-consuming for service provider

Service transaction is conducted remotely

Achieved with help of logistics and telecommunications


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Six Options for Service Delivery

Customer goes to service organization

Service organization comes tocustomer

Customer and service organizationtransact remotely (mail or electroniccommunications)

Theater

Barbershop

Bus service

Fast-food chain

House painting

Mobile car wash

Credit cardcompany

Local TV station

Mail delivery

Broadcastnetwork

Telephonecompany

Type o f Interact ion b etween Custom er

and Service Organizat ion

Single Site Multiple Sites

Av ailabi l i ty of Servic e Outlets


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Channel Preferences Varyamong Customers

For complex and high-perceived risk services, people tendto rely on personal channels. Eg. Insurance, investment Personal Banking

Individuals with greater confidence and knowledge about aservice/channel tend to use impersonal and self-servicechannels Eg. Online banking, online check-in, electroniccheque deposits

Customers with social motives tend to use personalchannels Eg. Movie rental vs movie theatre

Convenience is a key driver of channel choice


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Time of Service Delivery

Traditionally, schedules were restrictedService availability limited to daytime, 40 to 50

hours a week

Historically Sunday is considered as a rest day inChristian tradition,

Saturday in Jewish tradition, and Friday inMuslim tradition


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Time of Service Delivery

TodayFor flexible, responsive service operations:

- 24/7 service24 hours a day, 7 days a week, aroundthe world Eg. Gas Station, Bus Service,

Some organizations still avoid 7-day operations, forexample:

- Atlanta-based Chick-fil-A

Being closed on Sunday is part of our value

proposition- In Jamaica a lot of Service firms still close on

Sundays but some maintain customer service lines,

websites, automated channels


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Using Websites for Service Delivery

SafekeepingTrack package mo vements

Check repair status

Core: Use Web to del iver info rmat ion-based core services

Core

ConsultationCondu ct e-mai l dia log

Use expert sys tems

Order-takingMake/conf i rm reservat ions

Subm it appl icat ions

Order goods , check status

HospitalityRecord preferencesEg. Room type &

view, allerg ies

BillingReceive bi l l

Make auct ion bid

Check account status

ExceptionsMake special requests

Resolve prob lems

Eg. Website mess age board

PaymentPay by bank card

Direct debit

InformationRead bro chure/FAQ; get sc hedules/direct ions; check prices


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People


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The 7Ps of Services Marketing:People

Services marketing is mostly dependent onService Providers and their interaction withcustomers

PEOPLE All human actors participating in

the service delivery and thus influencing thebuyers perceptions:

firms personnel,

the customer

other customers in the serviceenvironment


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The 7Ps of Services Marketing:People

Interactions between customers andcontact personnel strongly influencecustomer perceptions of service quality

The right customer-contact employees

performing tasks wellJob design, Recruiting, Training

Motivation

The right customers for firms mission

Contribute positively to experience ofother customers

Can shape customer roles and managecustomer behavior


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The 7Ps of Services Marketing:Process

PROCESS the actual procedures,mechanisms, and flow of activities bywhich the service is delivered theservice delivery and operating systems

e.g. appointment, registration orpayment systems

h f k


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The 7Ps of Services Marketing:Process

Process involves choices of method and sequencein service creation and delivery

Design of activity flows

Number and sequence of actions for customersNature of customer involvement

Role of contact personnel

Role of technology, degree of automation

Badly designed processes waste time, create poorexperiences, and disappoint customers


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Physical Environment

Th 7P f S i M k i


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The 7Ps of Services Marketing:Physical Evidence

PHYSICAL EVIDENCE includes the

environment in which the service isdelivered and where the firm andcustomer interact, and any tangible

component that facilitates performanceor communication of the service

Th 7P f S i M k ti


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The 7Ps of Services Marketing:Physical Evidence

Create and maintain physicalappearances

Buildings/landscaping

Interior design/furnishings

Vehicles/equipmentStaff grooming/clothing

Sounds and smells

Other tangibles


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Marketing Must Be Integrated withOther Management Functions

M k ti M t B I t t d ith


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Three management func t ions play central and interrelatedro les in m eeting n eeds of serv ice custom ers

Marketing Must Be Integrated withOther Management Functions(Fig 1.10)

Customers

Operations

Management

Marketing

Management

Human Resources

Management

S h f C titi Ad t i


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Search for Competitive Advantage inServices Requires Differentiation and Focus

Intensifying competition in service sector threatensfirms with no distinctive competence andundifferentiated offerings

Slowing market growth in mature service industries

means that only way for a firm to grow is to take sharefrom competitors

Rather than attempting to compete in an entire market,firm mustfocus efforts on those customers it can servebest

Must decide how many service offerings with whatdistinctive (and desired) characteristics


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Service Strategy

All great service companies have a clear, compellingservice strategy. They have a reason for being thatenergises the organisation and defines the wordservice. A service strategy captures what gives theservice value to customers. To forge a path to a great

service, a companys leaders must define correctly thatwhich makes the service compelling. They must set inmotion and sustain a vision of service excellence, a setof guideposts that point to the future and show theway.

Leonard Berry


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Standing Apart from the Competition

A bu siness mus t set i tsel f apart from i ts compet i tion.

To be suc cessful i t must ident i fy and p romote itself

as the best provider of attr ibu tes that are

important to target custom ers

Georg e S. Day

Basic Focus Strategies for Services


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Basic Focus Strategies for Services

BREADTH OF SERVICE OFFERINGS

NUMBER OFMARKETSSERVED

Narrow

Many

Few

Wide

Service

FocusedUnfocused(Everything

for everyone)

MarketFocused

Fully Focused(Service &

market focused)

Source: Rober t JohnstonAchieving Focu s in Service Organizat ions, The Service Indus tr ies Jou rnal, Vol. 16, January 1996, pp. 1020


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Positioning Distinguishes a Brandfrom Its Competitors


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Four Principles of Positioning Strategy

Must establish position for firm or product in minds ofcustomers

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 peoplemust focusits efforts

Jack Trout

Possible Dimensions for Developing


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Possible Dimensions for DevelopingPositioning Strategies

Product attributesDHL going all theway, FedEx Relax its FedEx, UPSDeliver more

Price/quality relationshipsGeico youcan save 15% or more on car insurance

Reference to competitors (usuallyshortcomings) the bigger, betternetwork

Possible Dimensions for Developing


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Possible Dimensions for DevelopingPositioning Strategies

Usage occasions Ski Resorts offer downhill andcross-country skiing in the winter; hiking andmountain biking in the summer

User characteristics CheapTicket onlineservices is for travelers who are comfortablewith both internet usage and self service

Product class Blue Cross offers a variety ofdifferent health insurance packages for itscorporate customers to choose from in puttingtogether their employment benefits


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Positioning Maps

Using Positioning Maps to Plot


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Using Positioning Maps to PlotCompetitive Strategy

Useful way to represent consumer perceptions of alternativeproducts in visual format

Typically confined to two attributes, but 3-D models can beused 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.

If consumer perceptions of service characteristics differ

sharply from "reality" as defined by management, thenmarketing efforts may be needed to change these perceptions

Also known asperceptual maps

Positioning Maps Help Managers to


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Positioning Maps Help Managers toVisualize Strategy

Positioning maps display relative performance of competingfirms on key attributes

Research provides inputs to development of positioning mapschallenge is to ensure that

Attributes employed in maps are important to target segments

Performance of individual firms on each attribute accurately reflectsperceptions of customers in target segments

Predictions can be made of how positions may change in lightof future developments

Simple graphic representations are often easier for managersto grasp than tables of data or paragraphs of prose

Charts and maps can facilitate visual awakening to threatsand opportunities, suggest alternative strategic directions

P iti i ft N C t ti


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Positioning after New Construction:Price versus Service Level

Expensive

Shangri-LaHigh

ServiceModerateService

HeritageMandarin

New Grand

MarriottContinental

Regency

Sheraton

Italia

Alexander IV

Airport Plaza

PALACE

Atlantic

No action?

Action?

Less Expensive

Castle

Positioning After New Construction:


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Positioning After New Construction:Location versus Physical Luxury

High Luxury

Shangri-La

FinancialDistrict

InnerSuburbs

Heritage

Mandarin

New Grand

MarriottContinental

RegencySheraton

ItaliaAlexander IV

Airport Plaza

PALACE

Atlantic

No act ion?

Act ion?

Moderate Luxury

Castle

Shopping Districtand Convention Center

sm lecture 2 - service strategy positioning online

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