Introduction To: Ervices

CHAPTER 1
Introduction to
Services Marketing
Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 1
Overview of Chapter 1
 Why study services?

 Powerful forces that are transforming service
Markets
 What are services?
 Four broad categories of services
 Challenges posed by services
 Expanded marketing mix for services
 Framework for effective services marketing
strategies
Why Study Services?
Why Study Services?
 Services Dominate Economy in Most Nations

 Most New Jobs are Generated by Services
Fastest Growth Expected in Knowledge-Based Industries
Many New Jobs are Well-Paid Positions Requiring Good
Educational Qualifications
Contribution of Services Industries to
Global GDP
Estimated Size of Service Sector in
Selected Countries
Powerful Forces Are
Transforming Service
Markets
Forces Transforming the Service Economy
Social Business Advances in

Changes Trends IT
Government
Globalization
Policies
● New markets and product categories
● Increase in demand for services
● More intense competition
Innovation in service products & delivery systems, stimulated by better technology
Customers have more choices and exercise more power
Success hinges on:

● Understanding customers and competitors
● Viable business models
● Creation of value for customers and firm
Forces Transforming the Service Economy (1)

Changes Trends IT
Government
Globalization
Policies
● Changes in regulations
● Privatization
● New rules to protect customers,
employees, and the environment
● New agreement on trade in services

Changes Trends IT
Government
Globalization
Policies
● Rising consumer expectations
● More affluence
● Personal Outsourcing
● Increased desire for buying experiences vs.
things
● Rising consumer ownership of high tech
equipment
● Easier access to more information
● Immigration
● Growing but aging population

Changes Trends IT
Government
Globalization
Policies
● Push to increase shareholder value

● Emphasis on productivity and cost savings
● Manufacturers add value through service and sell
services
● More strategic alliances

● Focus on quality and customer satisfaction
● Growth of franchising
● Marketing emphasis by nonprofits

Changes Trends IT
Government
Globalization
Policies
● Growth of Internet
● Greater bandwidth
● Compact mobile equipment
● Wireless networking
● Faster, more powerful software
● Digitization of text, graphics, audio, video

Changes Trends IT
Government
Globalization
Policies
● More companies operating on transnational basis

● Increased international travel
● International mergers and alliances
● “Offshoring” of customer service
● Foreign competitors invade domestic markets
What Are Services?
What are Services? (1)
 Services involve a form of rental, offering benefits

without transfer of ownership
Include rental of goods
Marketing tasks for services differ from those involved in
selling goods and transferring ownership
 Five broad categories within non-ownership framework:

1. Rented goods services
2. Defined space and place rentals
3. Labor and expertise rentals
4. Access to shared physical environments
5. Systems and networks: access and usage
 Implications of Renting Versus Owning (Service Insights

1.1)
Markets exist for renting durable goods rather than selling them
Renting portions of larger physical entity (e.g., office space,
apartment) can form basis for service
Customers more closely engaged with service suppliers
Time plays central role in most services
Customer choice criteria may differ between rentals and outright
purchases
Services offer opportunities for resource sharing
Four Broad Categories
of Services
Four Broad Categories of Services
 Based on differences in nature of service act

(tangible/intangible) and who or what is direct recipient
of service (people/possessions), there are four
categories of services:
People processing
Possession processing
Mental stimulus processing
Information processing
Four Categories Of Services (Fig 1.10)
Four Categories Of Services
 People Processing
 Customers must:
 physically enter the service
factory
 co-operate actively with the

service operation
 Managers should think about

process and output from
customer’s perspective
 to identify benefits created and
non-financial costs:
- Time, mental, physical effort
Possession Processing
Possession Processing
Customers are less physically

involved compared to people
processing services
Involvement is limited
Production and consumption

are separable
Mental Stimulus Processing
● Mental Stimulus Processing
● Ethical standards required when

customers who depend on such
services can potentially be
manipulated by suppliers
● Physical presence of recipients

not required
● Core content of services is

information-based
Can be ‘inventoried’
Information Processing
 Information Processing
 Information is the most

intangible form of service
output,
 But may be transformed into

enduring forms of service output
 Line between information

processing and mental stimulus
processing may be blurred.
Value Added by Physical, Intangible Elements
Helps Distinguish Goods and Services (Fig 1.16)
Defining Services
 Services
 Are economic activities offered by one party to another
 Most commonly employ time-based performances to bring about
desired results in:
- Recipients themselves
- Objects or other assets for which purchasers have responsibility
 In exchange for their money, time, and effort, service customers

expect to obtain value from
 Access to goods, labor, facilities, environments, professional skills,
networks, and systems;
 But they do not normally take ownership of any of the physical
elements involved.
Challenges Posed by
Services
Services Pose Distinctive Marketing Challenges
 Marketing management tasks in the service sector differ from those in

the manufacturing sector.
 The eight common differences are:
 Most service products cannot be inventoried
 Intangible elements usually dominate value creation
 Services are often difficult to visualize and understand
 Customers may be involved in co-production
 People may be part of the service experience
 Operational inputs and outputs tend to vary more widely
 The time factor often assumes great importance
 Distribution may take place through nonphysical channels
Differences, Implications, and
Marketing-Related Tasks (1) (Table 1.1)
Difference Implications Marketing-Related Tasks
 Most service products  Customers may be  Use pricing, promotion,

cannot be inventoried turned away reservations to smooth
demand; work with ops to
manage capacity
 Intangible elements  Harder to evaluate
 Emphasize physical clues,
usually dominate service & distinguish employ metaphors and vivid
value creation from competitors images in advertising
 Services are often  Greater risk &  Educate customers on

difficult to visualize & uncertainty perceived making good choices; offer
understand guarantees
 Customers may be  Interaction between  Develop user-friendly

involved in co- customer & provider; equipment, facilities &
Production but poor task execution systems; train customers,
could affect satisfaction provide good support
Differences, Implications, and
Marketing-Related Tasks (2) (Table 1.1)
Difference Implications Marketing-Related Tasks
 People may be part of  Behavior of service  Recruit, train employees to

service experience personnel & customers reinforce service concept
can affect satisfaction  Shape customer behavior
 Operational inputs and  Hard to maintain quality,  Redesign for simplicity and
outputs tend to vary consistency, reliability failure proofing
more widely  Difficult to shield  Institute good service
customers from failures recovery procedures
 Time factor often  Time is money;  Find ways to compete on

assumes great customers want service speed of delivery; offer
importance at convenient times extended hours
 Distribution may take  Electronic channels or  Create user-friendly,

place through voice telecommunications secure websites and free
nonphysical channels access by telephone
Expanded Marketing
Mix for Services
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 only function to bring operating revenues into

a business; all other functions are cost centers.
● The “7 Ps” of services marketing are needed to create
viable strategies for meeting customer needs profitably in
a competitive marketplace
The 7 Ps of Services Marketing
● Product elements (Chapter 4)

● Place and time (Chapter 5)
● Price and other user outlays (Chapter 6)
● Promotion and education (Chapter 7)
● Process (Chapter 8)
● Physical environment (Chapter 10)
● People (Chapter 11)
●I don’t care if you learn this.

Traditional 4 Ps Applied to Services (1)
 Product elements
Service products are at the heart of services marketing strategy
Marketing mix begins with creating service concept that offers
value
Service product consists of core and supplementary elements
- Core products meet primary needs
- Supplementary elements are value-added enhancements
 Place and time

Service distribution can take place through physical and non-
physical channels
Some firms can use electronic channels to deliver all (or at least
some) of their service elements
Information-based services can be delivered almost
instantaneously electronically
Delivery Decisions: Where, When, How
Time is of great importance as customers are physically present
Convenience of place and time become important determinants of
effective service delivery
 Price and other user outlays

Marketers must recognize that customer costs involve more than
price paid to seller
Identify and minimize non-monetary costs incurred by users:
- 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
Revenue management is an important part of pricing
 Promotion and Education

Plays three vital roles:
- Provide information and advice
- Persuades the target customers of merit of service product or brand
- Encourages customer to take action at specific time
Customers may be involved in co-production so:

- Teach customer how to move effectively through the service process
- Shape customers’ roles and manage their behavior
Extended Mix for Managing the Customer
Interface (1)
 Process
 How firm does things may be as important as what it does
 Customers often actively involved in processes, especially when acting as co-
producers of service
 Operational inputs and outputs vary more widely
- Quality and content varies among employees, between employees
- Variations can be with different customers
- Variations from time of the day
 Variability can be reduced by:

- Standardized procedures
- Implementing rigorous management of service quality
- Training employees more carefully
- Automating tasks
- Train employees in service recovery procedures
 Manage process design and “flow of customers
Interface (2)
 Physical environment
 Design servicescape and provide tangible evidence of service
performances
 Create and maintain physical appearances
- Buildings/landscaping
- Interior design/furnishings
- Vehicles/equipment
- Staff grooming/clothing
- Sounds and smells
- Other tangibles
 Manage physical cues carefully— can have profound impact on customer
impressions
Interface (3)
 People
Interactions between customers and contact personnel strongly
influence customer perceptions of service quality
Well-managed firms devote special care to selecting, training and
motivating service employees
Other customers can also affect one’s satisfaction with a service
CHAPTER 2
Consumer Behavior in a
Services Context
 Consumer Decision Making: The Three-Stage Model

Pre-purchase Stage
Service Encounter Stage
Post-purchase Stage
Pre-purchase Stage
Pre-purchase Stage - Overview
Pre-purchase Stage  Customers seek solutions to

aroused needs
 Evaluating a service may be
difficult
 Uncertainty about outcomes
Increases perceived risk
Service Encounter Stage  What risk reduction strategies
can service suppliers develop?
 Understanding customers’
service expectations
 Components of customer
expectations
Post-purchase Stage  Making a service purchase
decision
Pre-purchase Stage Overview
 Need awareness
 Information search
 Evaluation of alternatives
Service attributes
Perceived risk
Service expectations
 Purchase decision
Pre-purchase Stage – Need Awareness
 A service purchase is triggered by an underlying need

(need arousal)
 Needs may be due to:
People’s unconscious minds (e.g., aspirations)
Physical conditions (e.g., chronic back pain)
External sources (e.g., marketing activities)
 When a need is recognized, people are likely take

action to resolve it
Pre-purchase Stage – Information Search
 When a need is recognized, people will search for

solutions.
 Several alternatives may come to mind and these form
the evoked set
Evoked set – set of possible services or brands that a
customer may consider in the decision process
 When there is an evoked set, the different alternatives

need to be evaluated before a final choice is made
Pre-purchase Stage – Evaluation of Alternatives
Service Attributes
 Search attributes help customers evaluate a product
before purchase
Style, color, texture, taste, sound
 Experience attributes cannot be evaluated before

purchase—must “experience” product to know it
Vacations, sporting events, medical procedures
 Credence attributes are product characteristics that

customers find impossible to evaluate confidently even
after purchase and consumption
Quality of repair and maintenance work
Perceived Risks
 Functional – unsatisfactory performance outcomes
 Financial – monetary loss, unexpected extra costs
 Temporal – wasted time, delays leading to problems
 Physical – personal injury, damage to possessions
 Psychological – fears and negative emotions
 Social – how others may think and react
 Sensory – unwanted impact on any of five senses
Perceived Risks - How Do Consumers Handle Them?

 Seeking information from respected personal sources
 Using Internet to compare service offerings and search
for independent reviews and ratings
 Relying on a firm that has a good reputation
 Looking for guarantees and warranties
 Visiting service facilities or trying aspects of service
before purchasing
 Asking knowledgeable employees about competing
services
Perceived Risks – Strategies for Firms to Manage Consume

Perceptions of Risk
 Free trial (for services with high experience attributes)
 Advertise (helps to visualize)
 Display credentials
 Use evidence management (e.g., furnishing, equipment etc.)
 Offer guarantees
 Encourage visit to service facilities
 Give customers online access to information about order
status
Lessons Learned about Perceived Risk
 Either try to do what is possible to help consumers

lower their perceived risk, or play up that risk for
competitors’ products/services.
 Example: Verizon vs. AT&T 3G Coverage
Service Expectations
 Customers evaluate service quality by comparing what
they expect against what they perceive
Situational and personal factors also considered
 Expectations of good service vary from one business to

another, and differently positioned service providers in
same industry
 Expectations change over time
 Example: Service Perspectives 2.
Parents wish to participate in decisions relating to their
children’s medical treatment for heart problems
Media coverage, education, Internet has made this possible
Service Expectations – Factors Influencing Consumer

Expectations of Service (Fig. 2.15)
Source:Adapted from Valarie A. Zeithaml, Leonard A. Berry, and A. Parasuraman, “The Nature and Determinants of Customer
Expectations of Service,” Journal of the Academy of Marketing Science 21, no. 1 (1993): 1-12
Service Expectations – Components of Custom Expectations

 Desired Service Level:
 Wished-for level of service quality that customer believes can and should
be delivered
 Adequate Service Level:
 Minimum acceptable level of service
 Predicted Service Level:
 Service level that customer believes firm will actually deliver
 Zone of Tolerance:
 Range within which customers are willing to accept variations in service

delivery
Pre-purchase Stage – Purchase Decision
 When possible alternatives have been compared and

evaluated, the best option is selected
 Can be quite simple if perceived risks are low and

alternatives are clear
 Very often, trade-offs are involved. The more complex

the decision, the more trade-offs need to be made
 Price is often a key factor in the purchase decision
Service Encounter Stage
Service Encounter Stage - Overview
Pre-purchase Stage
● Service encounters range from high-

to low-contact
● Understanding the servuction

Service Encounter Stage system
● Theater as a metaphor for service

delivery: An integrative perspective
 Service facilities
Post-purchase Stage  Personnel
 Role and script theories
Service Encounters Range from
High-contact to Low-contact (Fig 2.20)
Distinctions between High-contact and
Low-contact Services
 High-contact Services
Customers visit service facility and remain throughout service
delivery
Active contact between customers and service personnel
Includes most people-processing services
 Low-contact Services
Little or no physical contact with service personnel
Contact usually at arm’s length through electronic or physical
distribution channels
New technologies (e.g. Web) help reduce contact levels
 Medium-contact Services Lie in between These Two
The Servuction System (Fig 2.22)
Servuction System:
Service Production and Delivery
 Servuction System – visible front stage and invisible backstage

 Service Operations (front stage and backstage)
 Technical core where inputs are processed and service elements
created
 Includes facilities, equipment, and personnel
 Service Delivery (front stage)

 Where “final assembly” of service elements takes place and service
is delivered to customers
 Includes customer interactions with operations and other customers
 Other contact points

 Includes customer contacts with other customers
Theater as a Metaphor for
Service Delivery
“All the world’s a stage and all the men

and women merely players. They have
their exits and their entrances and
each man in his time plays many
parts”
William Shakespeare
As You Like It
Theatrical Metaphor:
An Integrative Perspective
 Good metaphor as service delivery is a series of events that

customers experience as a performance
 Service facilities
 Stage on which drama unfolds
 This may change from one act to another
 Personnel
 Front stage personnel are like members of a cast
 Backstage personnel are support production team
 Roles
 Like actors, employees have roles to play and behave in specific ways
 Scripts
 Specifies the sequences of behavior for customers and employees
Post-purchase Stage
Post-encounter Stage - Overview
Pre-purchase Stage
 Evaluation of service
performance
Service Encounter Stage
 Future intentions
Post-purchase Stage
Customer Satisfaction Is Central to the
Marketing Concept
 Satisfaction defined as attitude-like judgment

following a service purchase or series of service
interactions
 Customers have expectations prior to consumption,
observe service performance, compare it to
expectations
 Satisfaction judgments are based on this comparison
Positive disconfirmation if better than expected
Confirmation if same as expected
Negative disconfirmation if worse than expected
Customer Delight:
Going Beyond Satisfaction
 Research shows that delight is a function of

3 components
 Unexpectedly high levels of performance
 Arousal (e.g., surprise, excitement)
 Positive affect (e.g., pleasure, joy, or happiness)
 Once customers are delighted, their

expectations are raised
 If service levels return to previous levels, this
may lead to dissatisfaction and it will be more
difficult to “delight” customers in future
 Progressive Insurance seeks to delight
customers through exceptional customer
service (Service Insights 2.2)
Summary of Chapter 2:
Customer Behavior in a Services Context (1)
 Three-stage Model of service consumption helps us to

understand and better manage customer behavior
 Pre-purchase stage
Customers seek solutions to aroused needs
Evaluation alternatives is more difficult when a service involves
experience and credence attributes
Customers face perceived a variety of perceived risks in
selecting, purchasing and using services
Customers can use a variety of ways to reduce perceived risk
and firms can also manage risk perceptions
Customer expectations of service range from “desired” to
“adequate” with a zone of tolerance in between; if actual service
is perceived as less than adequate, customers will be dissatisfied
A purchase decision has to be made
Customer Behavior in a Services Context (2)
 Service encounter stage

 Service encounters range from high contact to low contact
 Servuction system consists of two parts:
- Service operations system
- Service delivery system
 Role and script theories help us understand, manage customer behavior
during encounters
 Theatrical view of service delivery offers insights for design, stage-
managing performances, and relationships with customer “audience”
 Post-purchase stage
 In evaluating service performance, customers can have expectations
positively disconfirmed, confirmed, or negatively disconfirmed
 Unexpectedly high levels of performance, arousal and positive affect are
likely to lead to delight
CHAPTER 3
Positioning
Services
in
Competitive Markets
 Achieve Competitive Advantage through Focus

 Market Segmentation Forms the Basis for Focused
Strategies
 Service Attributes and Levels
 Developing an Effective Positioning Strategy
 Using Positioning Maps to Analyze Competitive
Strategy
Achieve Competitive
Advantage Through
Focus
Focus Underlies the Search for
Competitive Advantage
 Intensifying competition makes it important to

differentiate products
 In mature markets, only way to grow may be to take a
share from competitors
 Brand positioning helps create awareness, generate
interest and desire among potential customers and
increase adoption of service products
 Emphasize competitive advantage on those attributes
that will be valued by customers in target segment(s)
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
(Fig. 3.2)
As I mentioned in class, I’m not entirely comfortable with this

“Achieving Focus Matrix”
Please rely on the more tried-and-true strategies to develop

Competitive advantage: Cost/Product Service
Differentiation/Niche
I have included some slide on that to refresh your memory.
Competitive
5 Advantage
LO
Competitive The set of unique features of a company and

Advantage its products that are perceived by the target
market as significant and superior to the
competition.
Competitive
5 Advantage
LO
Cost
Types of Product/Service
Competitive Differentiation
Advantage
Niche Strategies
Cost 5Competitive Advantage
LO
Cost Being the low-cost competitor in an

Competitive industry while maintaining satisfactory
Advantage profit margins.
Cost 5Competitive Advantage
LO
 Obtain inexpensive raw

materials
 Create efficient plant
operations
 Design products for ease of
manufacture
 Control overhead costs
 Avoid marginal customers
Sources
5 of Cost Reduction
LO
Experience Curves Product Design
Efficient Labor Reengineering
No-frills Products Production Innovations
New Service
Government Subsidies
Delivery Methods
Product/Service Differentiation
LO5
Product/Service
Differentiation The provision of something that is unique
Competitive and valuable to buyers beyond simply
offering a lower price than the
Advantage
competition’s.
Examples of
LO5
Product/Service Differentiation
 Brand names
 Strong dealer network
 Product reliability
 Image
 Service
Niche5 Competitive Advantage
LO
Niche The advantage achieved when a firm

Competitive seeks to target and effectively serve a
Advantage small segment of the market.
Highly Competitive Markets
 What do you do when your service is very similar (or

identical) to your competitors?
 What do you do when your PRICING is also very

similar (or identical) to your competitors?
 How do you differentiate (or position) your company?
 Insurance Providers:
Insurance Providers
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Niche5 Competitive Advantage
LO
 Used by small companies with limited

resources
 May be used in a limited geographic

market
 Product line may be focused on a

specific product category
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
 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
 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”
Market Segmentation
Forms the basis for
Focused Strategies
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
Within segments, they are as similar as possible. Between
segments, they are as dissimilar as possible
Identifying and Selecting Target Segments
 A target segment is one that a firm has selected from

among those in the broader market and may be defined
on the basis of multiple variables
 Must analyze market to determine which segments offer
better opportunities
 Target segments should be selected with reference to
Firm’s ability to match or exceed competing offerings directed at
the same segment
Not just profit potential
 Some ‘underserved’ segments can be huge, especially

poor consumers in emerging economies, e.g. low-income
group in Philippines
Service Attributes
and Levels
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
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
Disc Golf Retailers
 www.wrightlife.com
 www.discgolfcenter.com
Determinant Attributes?
Competitive Advantage?
Focus Strategies?
Web Search Companies
 www.google.com
 www.bing.com
Determinant Attributes?
Competitive Advantage?
Focus Strategies?
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
 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)
Developing an Effective
Positioning Strategy
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
 A company cannot be all things to all people - must focus
its efforts
Jack Trout
Six Questions for Effective Positioning Strategy
 What does our firm currently stand for in the minds of current and
potential customers?
 What customers do we serve now, and which ones would we like to
target in future?
 What is value proposition for each of our current service products,
and what market segments is each one targeted at?
 How does each of our service products differ from competitors’?
 How well do customers in chosen target segments perceive our
service products as meeting their needs?
 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
Developing an Effective Positioning Strategy
 Positioning links market analysis and competitive analysis to

internal corporate analysis
 Market Analysis
 Focus on overall level and trend of demand and geographic locations
of demand
 Look into size and potential of different market segments

 Understand customer needs and preferences and how they perceive
the competition
 Internal Corporate Analysis
 Identify organization’s resources, limitations, goals, and values
 Select limited number of target segments to serve
 Competitor Analysis
 Understand competitors’ strengths and weaknesses
 Anticipate responses to potential positioning strategies
Market, Internal and Competitive Analyses
(Fig. 3.11)
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
Positioning of Belleville Hotels:
Service Level vs. Price (Fig. 3.15)
Positioning of Belleville Hotels:
Location vs. Physical Luxury (Fig. 3.16)
Future Positioning of Belleville Hotels:
Service Level vs. Price (Fig. 3.18)
Future Positioning of Belleville Hotels: Location
vs. Physical Luxury (Fig. 3.19)
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
Summary for Chapter 3: Positioning Services In
Competitive Markets (1)
 Focus underlies search for competitive advantage

 Four focus strategies:
Service focused
Fully focused
Market focused
Unfocused
 Market segmentation forms the basis for focused strategies

 Service attributes that are determinant attributes are often the ones
most important to customers
Summary for Chapter 3: Positioning Services In
Competitive Markets (2)
 Positioning distinguishes a brand from its competitors

 Positioning links market analysis and competitive analysis to
internal corporate analysis
 To develop a marketing positioning strategy, we need
Market analysis
Internal analysis
Competitor analysis
 Positioning maps are useful for plotting competitive strategy

Mapping future scenarios help identify potential competitive responses
Positioning charts help visualization of strategy
Other Perceptual Maps shown in class
Positioning of Different Bar Soaps
High
moisturizing
• Tone • Zest
7
4 • Lever 2000
• Dove
2
5
• Safeguard
• Lux 8
Nondeodorant 3 Deodorant
1
• Lava • Dial
“Product Space” • Lifebuoy
Representing Consumers’ Perception for 6
Different Brands of Bar Soap
Exhibit 3-13 Low
moisturizing
3-14
CHAPTER 4
Developing SERVICE
Products: Core and
Supplementary Elements
 Designing a Service Product
 The Flower of Service
 Branding Service Products and Experiences
 New Service Development
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
Designing a Service Concept (1)
 Core Product
Central component that supplies the principal, problem-solving
benefits customers seek
 Supplementary Services
Augment the core product, facilitating its use and enhancing its
value and appeal
 Delivery Processes
Used to deliver both the core product and each of the
supplementary services
Designing a Service Concept (2)
 Service concept design must address the following

issues:
How the different service components are delivered to the
customer
The nature of the customer’s role in those processes
How long delivery lasts
The recommended level and style of service to be offered
Integration of Core Product, Supplementary
Elements and Delivery Process (Fig. 4.3)
The Flower of Service
The Flower of Service (Fig 4.4) (1)
Information
Payment Consultation
Billing Core Order-Taking
Exceptions Hospitality
Safekeeping
KEY:
Facilitating elements
Enhancing elements
The Flower of Service (2)
 There are two kinds of supplementary services

Facilitating supplementary services – either needed for
service delivery, or help in the use of the core product
Enhancing supplementary service – add extra value for the
customer
 In a well-designed and well-managed service

organization, the petals and core are fresh and well-
formed
 Market positioning strategy helps to determine which
supplementary services should be included
Supplementary Services (1)
 Facilitating
Information – customers often require information about how
to obtain and use a product or service
Order-Taking – Customers need to know what is available
and may want to secure commitment to delivery. The process
should be fast and smooth
Billing – Bills should be clear, accurate and intelligible
Payment – Customers may pay faster and more cheerfully if
you make transactions simple and convenient for them
Supplementary Services (2)
 Enhancing
Consultation – Value can be added to goods and services by
offering advice and consultation tailored to each customer’s
needs and situation
Hospitality – Customers who invest time and effort in visiting

a business and using its services deserve to be treated as
welcome guests
Safekeeping – Customers prefer not to worry about looking

after the personal possessions that they bring with them to a
service site
Exceptions – Customers appreciate some flexibility when they

make special requests and expect responsiveness when
things don’t go according to plan
Facilitating Services – Examples of Information
(Fig. 4.5)
Facilitating Services – Examples of Order-Taking
(Fig. 4.7)
Facilitating Services – Examples of Billing (Fig. 4.9)
Facilitating Services – Examples of Payment
(Fig. 4.10)
Enhancing Services – Examples of Consultation
(Fig. 4.11)
Enhancing Services – Examples of Hospitality
(Fig. 4.13)
Enhancing Services – Examples of Safekeeping
(Fig. 4.14)
Enhancing Services – Examples of Exceptions
(Fig. 4.15)
Managerial Implications
 Not every core product is surrounded by supplementary

elements from all eight clusters
 Nature of product helps to determine:
 Which supplementary services must be offered
 Which might usefully be added to enhance value and ease of doing
business with the organization
 People-processing and high contact services tend to have more

supplementary services
 Firms that offer different levels of service often add extra
supplementary services for each upgrade in service level
Branding Service
Products and
Experiences
Service Products
 A product implies a defined and consistent “bundle of

output”
 Firms can differentiate its bundle of output from
competitors’
 Providers of more intangible services also offer a
“menu” of products
Represent an assembly of elements that are built around the core
product
May include certain value-added supplementary services
Product Lines And Brands
 Most service organizations offer a line of products rather

than just a single product.
 They may choose among 3 broad alternatives:
Single brand to cover all products and services
A separate, stand-alone brand for each offering
Some combination of these two extremes
Spectrum of Branding Alternatives
(Fig 4.18)
Source: derived from Aaker and Joachimsthaler
Example: British Airways Subbrands
 British Airways offers seven distinct air travel products

Four intercontinental offerings:
- First (deluxe service)
- Club World (business class)
- World Traveller Plus (premier economy class)
- World Traveller (economy class)
Two intra-European offerings:
- Club Europe (business class)
- Euro-Traveller (economy class)
- UK Domestic (economy class between London and major
British cities
Offering a Branded Experience (1)
 Branding can be used at both company and product

levels
 Corporate brand:
Easily recognized
Holds meaning to customers
Stands for a particular way of doing business
 Product brand:
Helps firm establish mental picture of service in consumers’
minds
Helps clarify value proposition
Offering A Branded Experience (2)
“The brand promise or value proposition is

not a tag line, an icon, or a color or a graphic
element, although all of these may contribute.
It is, instead, the heart and soul of the brand….”
Don Schultz
New Service
Development
A Hierarchy of
New Service Categories (1)
1. Style changes
Visible changes in service design or scripts
2. Service improvements
Modest changes in the performance of current products
3. Supplementary service innovations

Addition of new or improved facilitating or enhancing elements
4. Process-line extensions
Alternative delivery procedures
A Hierarchy of
New Service Categories (2)
5. Product-line extensions
Additions to current product lines
6. Major process innovations

Using new processes to deliver existing products with added
benefits
7. Major service innovations

New core products for previously undefined markets
Achieving Success in Developing
New Services
 In developing new services,

Core product is of secondary importance
Ability to maintain quality of the total service offering is key
Accompanying marketing support activities are vital
Market knowledge is of utmost importance
Success Factors in New Service Development
 Market synergy
 Good fit between new product and firm’s image/resources
 Advantage vs. competition in meeting customers’ needs
 Strong support from firm during/after launch
 Firm understands customer purchase decision behavior
 Organizational factors
 Strong interfunctional cooperation and coordination
 Internal marketing to educate staff on new product and its competition
 Employees understand importance of new services to firm
 Market research factors

 Scientific studies conducted early in development process
 Product concept well defined before undertaking field studies
Developing Service Concepts (1)
 Creating services involve:

 Designing core product, supplementary services and delivery process
 Flower of service includes core product and two types of

supplementary services: facilitating and enhancing
 Facilitating services include information, order taking, billing, and
payment
 Enhancing services include consultation, hospitality, safekeeping, and
exceptions
 Spectrum of branding alternatives exists for services

 Branded house
 Subbrands
 Endorsed brands
 House of brands
Developing Service Concepts (2)
 Seven categories of new services:

 Style changes
 Service improvements
 Supplementary service innovations
 Process-line extensions
 Product-line extensions
 Major process innovations
 Major service innovations
 Success factors in new service development:

 Market synergy
 Organizational factors
 Market research factors

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CHAPTER 1

 Why study services?

 Services Dominate Economy in Most Nations

Social Business Advances in

Innovation in service products & delivery systems, stimulated by better technology

Customers have more choices and exercise more power

Success hinges on:

Social Business Advances in

● New agreement on trade in services

Social Business Advances in

Social Business Advances in

● Push to increase shareholder value

● More strategic alliances

Social Business Advances in

Social Business Advances in

● More companies operating on transnational basis

 Services involve a form of rental, offering benefits

 Five broad categories within non-ownership framework:

 Implications of Renting Versus Owning (Service Insights

 Based on differences in nature of service act

 co-operate actively with the

 Managers should think about

Customers are less physically

Production and consumption

● Mental Stimulus Processing

● Ethical standards required when

● Physical presence of recipients

● Core content of services is

 Information is the most

 But may be transformed into

 Line between information

 In exchange for their money, time, and effort, service customers

 Marketing management tasks in the service sector differ from those in

 Intangible elements usually dominate value creation

 Services are often difficult to visualize and understand

 Customers may be involved in co-production

 People may be part of the service experience

 Operational inputs and outputs tend to vary more widely

 The time factor often assumes great importance

 Distribution may take place through nonphysical channels

Difference Implications Marketing-Related Tasks

 Most service products  Customers may be  Use pricing, promotion,

 Services are often  Greater risk &  Educate customers on

 Customers may be  Interaction between  Develop user-friendly

Difference Implications Marketing-Related Tasks

 People may be part of  Behavior of service  Recruit, train employees to

 Time factor often  Time is money;  Find ways to compete on

 Distribution may take  Electronic channels or  Create user-friendly,

● Marketing can be viewed as:

● Marketing is only function to bring operating revenues into

● Product elements (Chapter 4)

●I don’t care if you learn this.

 Place and time

 Price and other user outlays

Identify and minimize non-monetary costs incurred by users:

- Additional monetary costs associated with service usage (e.g.,

- Time expenditures, especially waiting

- Unwanted mental and physical effort