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