POSITIONING A SERVICE IN THE MARKETPLACE
Frequently heard statements like “value for money”, “our people are the key”, or “convenience” are
of little descriptive or differentiating value for developing competitive strategy.
Without knowing which product features are of the specific interest to customers, it’s hard for
managers to develop an appropriate competitive strategy for their firm and its products, and harder
still to evaluate a product’s subsequent performance in the marketplace.
The search for competitive advantage.
To be successful, business must identify and promote itself as the best provider of attributes that are
important to target customers.
Need for focus in competitive strategy.
In most instances buyers are individuals and corporations, too widely scattered, too varied for the
needs, purchasing behavior, and consumption pattern. Different service firms vary widely in their
abilities to serve different types of customers. Hence, rather then trying to compete in an entire
market, perhaps against superior competitors, each firm should adopt a strategy of market
segmentation, identifying those parts, or segments, that it can serve best.
Individual based customization (e.g. dentist, architect services; or even a bank developing a
sophisticated loan package for a corporate client).
Partial customization – achieving economies of scale by offering standardized core products
(sometimes tailored with supplementary elements).
Identifying and selecting target segments.
A target segment is one that a firm has selected from among those in the broader market.
Frequently, target segments are defined on the basis of several variables.
E.g., a department store in a particular city might target residents of the metropolitan area
(geographic segmentation) who had incomes within certain range (demographic), valued personal
service from a knowledgeable staff and were not highly price sensitive (both reflecting
segmentation according to expressed attitudes and behavioral intentions).
Because competing retailers in the city would probably be targeting the same customers, the
department store would have to position itself in ways that created a distinctive appeal; appropriate
characteristics to highlight might include a wide range of merchandise categories, breadth of
selection within each product category, availability of supplementary services as advice and home
delivery.
The segment selection should be done considering both sales and profit potential but also with
reference to the firm’s ability to match or exceed competing offerings directed at the same segment.
In order to select target segments and to design effective positioning strategies, managers need
insights into how the various components (or attributes) of a service are valued by current and
prospective customers within different market segments. E.g.,
- What level of quality and performance is required for each attribute?
- Are there significant differences between segments in the importance that customers attach to
different attributes?
- How well do competing products meet customer requirements?
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Positioning a service in the marketplace
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Can an existing product be redesigned so that it better meets consumer needs and is superior to
competing offerings?
Understanding consumer choice behavior.
Front-stage service facilities and personnel are tangible, but these are operational elements needed
to create a service. The actual service is a deed or performance that is difficult to evaluate prior to
consumption against competing alternatives.
(This problem is most acute for first-time users without prior experience of the service in question).
Developing a service concept for a specific segment.
Research is needed to identify what attributes of a given service are important to specific market
segments and how well prospective customers perceive competing organizations as performing
against these attributes.
However, strategies should recognize that the same individuals may set different priorities for
attributes according to:
- the purpose of using a service;
- who makes the decision;
- the timing of use (day/week/season);
- individual use or in group;
- composition of the group.
Consider a choice of restaurant for lunch during vacations with friends and family, versus selecting
the one for an expense account business lunch with prospective client, vs. a place to eat somewhere
with co-worker(s). This is unlikely to be the same restaurant, neither there will be the same choice
made by another similar person.
Who is making a decision is as important; e.g., in case of a hospital that can be the end user
(patient), or some intermediary (doctor). In second case a 2-step model is used, where at first
marketer determines what attributes are important to the customer in choosing the intermediary and
second, what attributes are important to the intermediary in selecting the service provider.
Importance vs. determinance.
Consumers make choices between alternative service offerings on the basis of perceived differences
between them. But the attributes that distinguish competing services from one another are not
always the most important ones.
E.g., in airlines, safety is the most important; but all airliners are considered safe. What start to
matter are the attributes down the list (e.g. food and beverage service on board, courtesy of
reservations personnel are the examples).
The marketer’s task in any service business is to identify which attributes are determinant and to be
aware how well each competing service performs on these determinant attributes. Findings from
such research are the necessary basis for developing a positioning campaign.
Creating a competing position.
Positioning is a process of establishing and maintaining a distinctive place in the market for an
organization and/or its individual product offerings.
“Differentiate from the pack” and “alter typical characteristics to their competitive advantages” are
the core elements of positioning.
Positioning answers questions of:
- What does our firm currently stand for in the minds of current and prospective customers?
- What customers do we now serve and which ones would we like to target for the future?
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Positioning a service in the marketplace
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What are the characteristics of our current service offerings (core products and their
accompanying supplementary service elements)?
In each instance, how do our service offerings differ from those of the competition?
How well do customers in different market segments perceive each of our service offerings as
meeting their needs?
What changes do we need to make to our offerings in order to strengthen our competitive
position within the market segment(s) of interest to our firm?
Competition content may be rather diverse (e.g., museums and other alternative forms of education,
entertainment, and recreation). To succeed, any institution needs a clear sense of mission and
distinctive position that sets it apart from the competition in ways that appeal to prospective clients.
Repositioning is redefining both service characteristics and target markets; sometimes up to
complete withdrawal. (Bankers Trust sold its retail branch to National Westminster Bank and
concentrated solely on corporate financial services and private banking, simultaneously using media
advertising to clarify its more narrowly focused expertise to prospective corporate clients).
Copy positioning vs. product positioning.
In competitive marketplace, a “position” reflects how consumers perceive the product’s (or
organization’s) performance on specific attributes relative to that of one or more competitors.
Customers’ brand choices reflect which brands are even known and remembered and then, how
each of these brands is positioned within each consumer’s mind.
Perceptual positionings in consumers’ minds condition real decisions. (People make decisions
based on their individual perceptions of reality, rather than on an expert’s definition of that reality).
Copy positioning – from packaged goods behavior – using AD, promotion, and publicity to create
images and associations. (E.g., Western cowboy in Marlboro – mean of adding glamour and
differentiating; it has nothing to do with qualities of tobacco). Slogans also add a differentiated feel
to the product.
Services, however, compete on more than just imagery or vague promises.
This entails decisions on substantive attributes that are known from research to be important to
customers, relating to product performance, price, and availability.
To improve product’s appeal to a specific target segment, it may be necessary to change its
performance on certain attributes, to reduce price, or to alter the times and locations when it is
available or the forms of delivery that are offered.
In such instances, the primary task of communication – AD, personal sales, PR – is to ensure that
prospective customers accurately perceive the position of the service on dimensions that are
important to them in making choice decisions.
Additional excitement and interest may be created by evoking certain images and associations in
AD, but these are likely to play only a secondary role in customer choice decisions unless
competing services are perceived virtually identical on performance, price, and availability.
Positioning’s role in marketing strategy.
Positioning links market analysis and competitive analysis to internal corporate analysis.
From these three, a position statement can be developed that enables the service organization to
answer the questions:
- What is our product (or service concept);
- What do we want to become;
- What actions must an organization take to get there?
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Positioning a service in the marketplace
Positioning may vary for products, outlets, or may be set for the entire organization. However,
overall coherency between different positioning strategies must be present.
Failing to implement positioning (especially for difficult to evaluate intangible services) may result
in one of several undesirable outcomes:
- The organization (or one of its products) is pushed into a position where it faces head-on
competition from stronger competitors;
- The organization (product) is pushed into a position which nobody else wants because there is
little customer demand there;
- The organization’s (product’s) position is so fuzzy that nobody knows what its distinctive
competency really is;
- The organization (product) has no position at all in the marketplace because nobody has ever
heard of it.
Listing. Principal uses of positioning in marketing management
1. Provide useful diagnostic tool for defining and understanding the relationships between
products and markets:
- How does the product compare with competitive offerings on specific attributes?
- How well does product performance meet consumer needs and expectations on specific
performance criteria?
- What is the predicted consumption level for a product with a given set of performance
characteristics offered at a given price?
2.
a.
b.
c.
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Identify market opportunities for:
Introducing new products:
What segments to target?
What attributes to offer relative to the competition?
Redesigning (repositioning) existing products:
Appeal to the same segments or to new ones?
What attributes to add, drop or change?
What attributes to emphasize in advertising?
Eliminate products that:
Do not satisfy consumer needs;
Face excessive competition.
3.
a.
b.
c.
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Making other marketing mix decisions to pre-empt, or respond to, competitive moves:
Distribution strategies:
Where to offer the product (locations, types of outlet)?
When to make the product available?
Pricing strategies:
How much to charge?
What billing and payment procedures to employ?
Communication strategies
What target audience(s) are most easily convinced that the product offers a competitive
advantage on attributes that are important to them?
What message(s)? Which attributes should be emphasized and which competitors – if any –
should be mentioned as the basis for comparison on those attributes?
Which communication channels – personal selling versus different advertising media? (Selected
not only for their ability to convey the chosen message(s) to the target audience(s), but also for
their ability to reinforce the desired image of the product).
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Positioning a service in the marketplace
Steps in developing positioning strategy.
Figure. Identifying a suitable market position and developing a marketing positioning strategy.
Market analysis is needed to determine such factors as:
- overall level and trend of demand;
- geographical location of demand;
- is demand increasing or decreasing for the benefits offered by this type of service?;
- are there regional or international variations in the level of demand?;
Alternative ways of segmenting the market should be considered and an appraisal made of the size
and potential of different market segments. Research may be needed to gain a better understanding
not only of customer needs and preferences within each of the different segments, but also of how
each perceives the competition.
Internal corporate analysis requires the organization to identify its resources (financial, human labor
and know-how, and physical assets), any limitations or constraints, and the values and goals
(profitability, growth, professional preferences, etc.) of its management. Using insights from this
analysis, the organization should be able to select a limited number of target market segments which
it is willing to and able to serve with either new or existing services.
Competitive analysis. Strengths and weaknesses suggest opportunities for differentiation. Relating
these insights to the internal corporate analysis should suggest which benefits should be offered to
which target market segments. This analysis should consider both direct and indirect competition.
The outcome of integrating these three forms of analysis is a position statement that articulates the
planned position of the organization in the marketplace (and, if desired, that of each of the
component services that it offers). Armed with this understanding, marketers should be able to
develop a specific plan of action.
The cost of implementing this plan must, of course, be related to the expected payoff.
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Positioning a service in the marketplace
Anticipating competitive response
Existing companies may have the same positioning; entrants may use “follow the leader” strategy
and try to serve better; etc.
The best way to anticipate possible competitive responses is to identify all current or potential
competitors and to put oneself in their own management’s shoes by conducting an internal
corporate analysis for each of these competitors.
(Mapping possible actions makes adoption of ultimate positioning decisions easier and justified;
however, this process has a substantial portion of subjectivity).
(Case study: Schwab historical analysis of gradual repositioning in parallel with service content
alteration, p. 173).
Perceptual mapping in services marketing
(Refer to Industrial marketing course materials).
As a generalization, graphic representations of product positions are much easier to grasp than
tables of quantitative data or paragraphs of prose. They enable management to understand the
nature of competitive threats and opportunities and how management sees it, and they can help
confirm or dispel beliefs that a service – or its parent organization – occupies a unique niche in the
marketplace.
Hotel industry example.
Factors: location, price,…
Visitors like: business travelers, vacationers and pleasure travelers, conventioneers (conference
delegates) have different preferences.
Palace hotel. 4 factors studied: room price, level of physical luxury, level of personal service, and
location.
(Convenient surrogate measure for service level was ratio of rooms per employee, easily calculated
from the published number of rooms and employment data filed with the city authorities; data from
surveys of travel agents conducted by the Palace provided additional insights on the quality of
personal service at each competitor).
Then, scales were created for each attribute. (PP. 176 (bottom)-177).
Map 1. Belleville’s principal business hotels: positioning map of service level vs. price level
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Positioning a service in the marketplace
Correlation b/w price and service is clear (higher service hotels are relatively more expensive).
Analysis demonstrates 3 clusters: top with 4-star Regency and 5-star Grand; middle: Palace is
clustered with 4 other hotels; low: 3 other 4-star hotels.
Interesting insight: Palace appears to be charging significantly more (on a relative basis) than its
service level would seem to justify. (Because its occupancy rate is very high, guests are evidently
willing to pay the ongoing rate).
Map 2. Belleville’s principal business hotels: positioning map of location vs. physical luxury.
(These variables are not expected to be related).
Key insight: Palace occupies a relatively empty portion on the map. It is the only hotel in the
financial district – a fact that probably explains its ability to charge more than its service level (or
degree of physical luxury) would seem to justify.
Weakly, there appear to be 2 clusters: luxurious group of three, led by the Grand, and a second
group of two with moderate luxury level.
What is the future? The Palace’s management team next thought to anticipate the positions of the
four new hotels being constructed in Belleville, as well as the probable repositioning of the Grand.
Construction sites of the new hotels are already known; two would be in the financial district and
two in the vicinity of the convention center, itself under expansion.
Press releases of Grand had already declared its management’s intentions: The “New Grand” would
not only be larger but the renovations would also be designed to make it even more luxurious and
there were plans to add new services.
Predicting the positions of the four new hotels was not difficult. Preliminary details were already
released. The owners of two hotels had declared their intentions to seek 5-star status, although it
may take a few years to achieve. Three of the newcomers would be affiliated with international
chains and their strategies could be guessed by examining recent hotels opened in other cities by
these same chains.
Pricing was also easy to project. It is linked to the average construction cost per room at the rate of
$1 per night for every $1000 of construction. (500-room hotel costs $100000000 to build, then a
room would cost $200000, i.e. $200 per night). I.e. four new hotels would have to charge
significantly more than the Grand and Regency, in effect establishing that marketers call a price
umbrella above existing price levels and thereby giving competitors the option of raising their own
prices. To justify their prices, the new hotels would have to offer customers very high standards of
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Positioning a service in the marketplace
service and luxury. At the same time, the New Grand would need to raise its own prices to recover
the costs of renovations, new construction, and enhanced service offerings.
Map 3. Belleville’s principal business hotels, following new construction: positioning map of
service level vs. price level.
Assuming no changes by either the Palace or other existing hotels, the impact of the new
competition on the Belleville market clearly posed a significant threat to the Palace, which would
lose its unique location advantage and in future be one of three hotels in the immediate vicinity of
the financial district.
Map 4. Belleville’s principal business hotels after new construction: positioning map of location vs.
physical luxury.
The sales stuff believed that many of the Palace’s existing business customers would be attracted to
the Continental and the Mandarin and willing to pay their higher rates in order to obtain the superior
benefits offered. The other two newcomers were seen as more of a threat to the Shangri-La,
Sheraton, and New Grand in the shopping district / convention center cluster. Meantime, the New
Grand and the newcomers would create a high price / high service (and high luxury) cluster at the
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Positioning a service in the marketplace
top end of the market, leaving Regency in what might prove to be distinctive – and therefore
defensible – space of its own.
DO NOTHING: Palace dropping into new cluster with Sheraton (or even Castle); gradual decline
(w/o renovation) implies a risk of reclassification to 3-star hotel.
DO ACTION: Renovations, service improvements, etc. will cluster Palace with Regency, resulting
in the same service level as cluster with Mandarin, but at somewhat lower price.
Action was selected assuming strategic growth of the number of business travelers. Attention is also
paid to retaining loyalty of frequent guests. AD and selling efforts promoted these improvements,
with frequent guests targeted by personal letters from the general manager.
In subsequent years, occupancy levels and profits held up very well.
Changing perceptions through advertisement.
Story of Long Island Trust, historically leading bank in this large New York suburban area.
Research showed that Long Island Trust was rated below banks like Chase Manhattan, and Citibank
on such key selection criteria as having many branches, offering a full range of services, quality of
service, and having substantial capital. However, Long Island Trust ranked first on helping Long
Island residents and the Long Island economy.
The bank’s AD agency developed a campaign promoting the “Long Island position,” playing to its
perceived strengths rather than seeking to improve perceptions on attributes on which it was
perceived less favorably. The tenor of the campaign can be gauged from the following extract from
a print ad:
Why send your money to the city if you live on the Island? It makes sense to keep your
money close to home. Not at a city bank but at Long Island Trust. Where it can work for
Long Island. After all we concentrate on developing Long Island. Not Manhattan Island or
some island off Kuwait….
Other Ads promoted similar themes, such as, “The city is a great place to visit, but would you want
a bank there?”
15 months later research revealed improvement of the bank on all attributes, reflecting a positive
“halo” effect.
Halo effects make objective evaluations of attributes difficult. (E.g. negative impression on effect A
makes impressions on other effects somewhat lower automatically).
Instead of quick questionnaires it is recommended to run in-depth interviews with customers in
order to reveal the true picture, but not blurred with halos.
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Positioning a service in the marketplace