Service Mix Strategy & Positioning

SERVICE MIX STRATEGY & POSITIONING The Expanded Marketing Mix Required for Services Service Focus Strategies Service Positioning

Expanded Marketing Mix for Services

Expanded Marketing Mix for Services

PRODUCT PLACE PROMOTION PRICE
Promotion blend Salespeople Flexibility Physical good Channel type features Quality level Accessories Packaging Warranties Product lines Branding Exposure

Price level Terms Differentiation Allowances

Intermediaries Advertising Outlet location Sales promotion Transportation Publicity Storage

Expanded Marketing Mix for Services

PEOPLE
Employees Customers Communicating culture and values Employee research

PHYSICAL EVIDENCE
Facility design Equipment Signage Employee dress Other tangibles

PROCESS
Flow of activities Number of steps Level of customer involvement

Services Require An 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 operating revenues into a business; all other functions are cost centers The 7Ps of services marketing are needed to create viable strategies for meeting customer needs profitably in a competitive marketplace

The Marketing Mix

The Marketing Mix

The tools available to a business to gain the reaction it is seeking from its target market in relation to its marketing objectives 7Ps Price, Product, Promotion, Place, People, Process, Physical Environment Traditional 4Ps extended to encompass growth of service industry

Product

THE SERVICE PRODUCT

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
Objective: To offer value to target customers To satisfy their needs better than competing alternatives

Core Products and Supplementary Services

Core Product Central component that supplies the principal, problem-solving benefits customers seek Supplementary services help to differentiate core products and create competitive advantage by: Facilitating use of core product (a service or a good) Enhancing the value and appeal of the core product

The Flower of Service

Information Payment Billing

Core

Consultation Order Taking

Exceptions Safekeeping
KEY:

Hospitality

Facilitating elements Enhancing elements

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

Reservation Cashier Business Center Room Service A Bed for the Night in an Elegant Private Room with a Bathroom Valet Parking Reception

Baggage Service Cocktail Bar

Wake-up Call Internet

Entertainment/ Restaurant Sports/ Exercise

Price

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

Pricing objectives can include
Generating 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 pricing Competition-based pricing Value-based pricing

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

Cost-based pricing seeks to recover costs plus a margin for profit; includes both traditional and activity-based costing 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 and beverages)

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

Firm must be aware of competitive pricing but may be harder to compare for services than for goods Value-based pricing should reflect net benefits to customer 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

Promotion

The 7Ps of Services Marketing: Promotion & Education Informing, educating, persuading, reminding customers 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

Marketing Communications Mix for Services (1)

Personal communications Selling Customer service Training Telemarketing

Advertising
Broadcast, podcasts Print Internet

Sales promotion Sampling Coupons Sign-up rebates Gifts Prize promotions

Outdoor Direct mail

Word of (other customers) mouth

Word-of-mouth

Key: * Denotes communications originating from outside the organization

Marketing Communications Mix for Services (2)

Publicity & public relations Instructional manuals Websites Manuals Brochures Corporate design Signage Interior decor Vehicles Equipment Stationery Uniforms

Press releases/kits
Press conferences Special Events Sponsorship Trade Shows, exhibitions

Interactive software
Voice mail

Media-initiated coverage

Key: * Denotes communications originating from outside the organization

Place

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

Applying the Flow Model of Distribution 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

Distribution Options for Serving Customers

Customers visit service site
Convenience of service factory locations and operational schedules important 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

Six Options for Service Delivery

Availability of Service Outlets Type of Interaction between Customer and Service Organization Customer goes to service organization Single Site Multiple Sites

Theater Barbershop

Bus service Fast-food chain

Service organization comes to customer

House painting Mobile car wash

Mail delivery

Customer and service organization transact remotely (mail or electronic communications)

Credit card company

Local TV station

Broadcast network
Telephone company

Channel Preferences Vary among Customers

For complex and high-perceived risk services, people tend to rely on personal channels. Eg. Insurance, investment Personal Banking Individuals with greater confidence and knowledge about a service/channel tend to use impersonal and self-service channels Eg. Online banking, online check-in, electronic cheque deposits Customers with social motives tend to use personal channels Eg. Movie rental vs movie theatre Convenience is a key driver of channel choice

Time of Service Delivery Traditionally, schedules were restricted Service availability limited to daytime, 40 to 50 hours a week Historically Sunday is considered as a rest day in Christian tradition, Saturday in Jewish tradition, and Friday in Muslim tradition

Time of Service Delivery

Today For flexible, responsive service operations: - 24/7 service24 hours a day, 7 days a week, around the world Eg. Gas Station, Bus Service, Some organizations still avoid 7-day operations, for example: - 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

Using Websites for Service Delivery

Information
Read brochure/FAQ; get schedules/ directions; check prices

Payment
Pay by bank card Direct debit

Consultation
Conduct e-mail dialog Use expert systems

Billing
Receive bill Make auction bid Check account status Core

Order-taking
Make/confirm reservations Submit applications Order goods, check status

Exceptions
Make special requests Resolve problems Eg. Website message board

Hospitality
Safekeeping
Record preferences Eg. Room type & view, allergies

Track package movements Check repair status

Core: Use Web to deliver information-based core services

People

The 7Ps of Services Marketing: People

Services marketing is mostly dependent on Service Providers and their interaction with customers

PEOPLE All human actors participating in the service delivery and thus influencing the buyers perceptions:
firms personnel, the customer other customers in the service environment

The 7Ps of Services Marketing: People

Interactions between customers and contact personnel strongly influence customer perceptions of service quality The right customer-contact employees performing tasks well Job design, Recruiting, Training Motivation The right customers for firms mission Contribute positively to experience of other customers Can shape customer roles and manage customer behavior

Process

The 7Ps of Services Marketing: Process

PROCESS the actual procedures, mechanisms, and flow of activities by which the service is delivered the service delivery and operating systems e.g. appointment, registration or payment systems

The 7Ps of Services Marketing: Process Process involves choices of method and sequence in service creation and delivery Design of activity flows Number and sequence of actions for customers Nature of customer involvement Role of contact personnel Role of technology, degree of automation Badly designed processes waste time, create poor experiences, and disappoint customers

Physical Environment

The 7Ps of Services Marketing: Physical Evidence

PHYSICAL EVIDENCE includes the environment in which the service is delivered and where the firm and customer interact, and any tangible component that facilitates performance or communication of the service

The 7Ps of Services Marketing: Physical Evidence

Create and maintain physical appearances

Buildings/landscaping Interior design/furnishings Vehicles/equipment Staff grooming/clothing Sounds and smells Other tangibles

Marketing Must Be Integrated with Other Management Functions

Marketing Must Be Integrated with Other Management Functions (Fig 1.10)

Three management functions play central and interrelated roles in meeting needs of service customers

Operations Management Customers

Marketing Management

Human Resources Management

Search for Competitive Advantage in Services Requires Differentiation and Focus

Intensifying competition in service sector threatens firms with no distinctive competence and undifferentiated offerings Slowing market growth in mature service industries means that only way for a firm to grow is to take share from competitors Rather than attempting to compete in an entire market, firm must focus efforts on those customers it can serve best Must decide how many service offerings with what distinctive (and desired) characteristics

Service Strategy
All great service companies have a clear, compelling service strategy. They have a reason for being that energises the organisation and defines the word service. A service strategy captures what gives the service value to customers. To forge a path to a great service, a companys leaders must define correctly that which makes the service compelling. They must set in motion and sustain a vision of service excellence, a set of guideposts that point to the future and show the way.
Leonard Berry

Standing Apart from the Competition

A business must set itself apart from its competition. To be successful it must identify and promote itself as the best provider of attributes that are important to target customers

George S. Day

Basic Focus Strategies for Services

BREADTH OF SERVICE OFFERINGS

Narrow
Service Focused

Wide
Unfocused (Everything for everyone)

Many
NUMBER OF MARKETS SERVED

Few

Fully Focused Market (Service & Focused market focused)

Source: Robert Johnston Achieving Focus in Service Organizations, The Service Industries Journal, Vol. 16, January 1996, pp. 1020

Positioning Distinguishes a Brand from Its Competitors

Four Principles of Positioning Strategy

Must establish position for firm or product in minds of customers 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 focus its efforts
Jack Trout

Possible Dimensions for Developing Positioning Strategies

Product attributes DHL going all the way, FedEx Relax its FedEx, UPS Deliver more Price/quality relationships Geico you can save 15% or more on car insurance Reference to competitors (usually shortcomings) the bigger, better network

Possible Dimensions for Developing Positioning Strategies Usage occasions Ski Resorts offer downhill and cross-country skiing in the winter; hiking and mountain biking in the summer User characteristics CheapTicket online services is for travelers who are comfortable with both internet usage and self service Product class Blue Cross offers a variety of different health insurance packages for its corporate customers to choose from in putting together their employment benefits

Positioning Maps

Using Positioning Maps to Plot Competitive Strategy

Useful way to represent consumer perceptions of alternative products in visual format Typically confined to two attributes, but 3-D models can be used 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, then marketing efforts may be needed to change these perceptions Also known as perceptual maps

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

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

Positioning after New Construction: Price versus Service Level

Mandarin New Grand Heritage Marriott Continental Expensive

Action? Regency High Service

PALACE
Shangri-La No action? Atlantic Sheraton Italia Castle Alexander IV Airport Plaza Moderate Service

Less Expensive

Positioning After New Construction: Location versus Physical Luxury

High Luxury Mandarin

New Grand
Continental Action? PALACE Financial District No action? Shopping District and Convention Center Italia Alexander IV Atlantic Airport Plaza Inner Suburbs Heritage Marriott Sheraton Shangri-La Regency

Castle

Moderate Luxury