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WELCOME TO 494 SERVICE OPERATIONS MANAGEMENT

• HBM 494

• Wednesday 16:00- 18:00 pm

– Jim Harbour - Zoom

• Wednesday 10:15 – 12:15

– Giuseppina Menconi

GOAL OF TODAY

• Get to know each other

• Set the expectations of what success looks like in this class

• Start talking about the group project.

MY BACKGROUND

• WSU-SHBM and GU-MBA

• Post WSU

– Houston's, Sawtooth, – South Fork, Sweet Mutiny (sold it), Fork in the Road, Porch Light

Pizza, CASK (closed it) • Round Top Public House the restaurant at the Golf Course.

• Family – Wife and 2 Daughters

Thailand 2007 – 2014

Switzerland Cesar Ritz Brig Winter 2012

Spain – Valencia 2015 – 2022 and this coming summer!

ABROAD EXPERIENCES

WHO DO WE HAVE IN THE CLASS

• I think we have 10 people in the class?

• I believe most of you know each other well because you are going

through this program as a cohort.

• I do not know you! – Thus, where are we from?

– Do you have a direction for your career?

– Do you have friends or family in the business?

– Why are you in this major?

– What do you want to learn in this class?

– What internships or jobs have you had or do you have set up?

Will be posted on Canvas which is on the WSU platform.

Do you all have access.

Lets go over the plan as of now some details may change just a bit.

Explanation of the assignments/assessments will all be communicated in the syllabus.

Writing in the major.

Canvas.wsu.edu

SYLLABUS

CANVAS

• Announcements

• Syllabus

• Course Schedule

• Modules

• Assignments

• Discussions

• Quizzes

• Zoom

• Grades

• People

• The Book

Do any of you have a dream of opening your own place?

If so what is it that you hope to open?

Could it work for this project?

IDEAS FOR PROJECTS

WEEK 1 NEW PERSPECTIVES ON

MARKETING IN THE SERVICE ECONOMY

Why Study Services?

• Services dominate most economies and are growing

rapidly:

– Services account for more than 60% of GDP worldwide

– Almost all economies have a substantial service sector

– Most new employment is provided by services

– Strongest growth area for marketing

• Understanding services offers you a personal competitive

advantage

Services Dominate the Global

Economy

Contribution of Service Industries to GDP Globally

Source: The World Factbook 2008, Central Intelligence Agency

Services 64%

Agriculture 4%

Manufacturing 32%

SERVICES

Business Services

12%

Transport, Utilities

& Communications

Wholesale &

Retail Trade 12%

Source: US Bureau of Economic Analysis, Industry Economics Accounts, 2007

Value Added by Service Industry

Categories to U.S. GDP

 HMO Medical Centers

 Industrial Design Services

 Investment Banking and Securities

Dealing

 Management Consulting Services

 Satellite Telecommunications

 Telemarketing Bureaus

 Temporary Help Services

 Casino Hotels

 Continuing Care Retirement

Communities

 Diagnostic Imaging Centers

 Diet and Weight Reducing Centers

 Environmental Consulting

 Golf Courses, Country Clubs

 Hazardous Waste Collection

NAICS Codes of Newer Service

Industries Not Profiled By SIC

Why Study Services?

• Most new jobs are generated by services

– Fastest growth expected in knowledge-based industries

– Significant training and educational qualifications required,

but employees will be more highly compensated

– Will service jobs be lost to lower-cost countries? Yes, some service

jobs can be exported

Why Study Services?

• Powerful forces are transforming service markets

– Government policies, social changes, business trends,

advances in IT, internationalization

• Forces that reshape:

– Demand

– Supply

– The competitive landscape

– Customers’ choices, power, and decision making

Transformation of the

Service Economy

Government

Policies

Business

Trends

Social

Changes Advances

In IT

Globalization

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

Customers have more choices and exercise more power

 Understanding customers and competitors

 Viable business models

 Creation of value for customers and firm

 New markets and product categories

 Increase in demand for services

 More intense competition

Success hinges on:

Increased focus on services marketing and management

Factors Stimulating Transformation

of the Service Economy

Government

Policies

Business

Trends

Social

Changes Advances

In IT

Globalization

 Changes in regulations

 Privatization

 New rules to protect customers, employees,

and the environment

 New agreement on trade in services

Factors Stimulating Transformation

of the Service Economy

Business

Trends

Social

Changes Advances

In IT

Globalization

 Rising consumer expectations

 More affluence

 More people short of time

 Increased desire for buying experiences vs.

things

 Rising consumer ownership of high tech

equipment

 Easier access to information

 Immigration

 Growing but aging population

Government

Policies

Factors Stimulating Transformation

of the Service Economy

Business

Trends

Social

Changes Advances

In IT

Globalization

 Push to increase shareholder value

 Emphasis on productivity and cost savings

 Manufacturers add value through service and

sell services

 More strategic alliances and outsourcing

 Focus on quality and customer satisfaction

 Growth of franchising

 Marketing emphasis by nonprofits

Government

Policies

Factors Stimulating Transformation

of the Service Economy

Business

Trends

Social

Changes Advances

In IT

Globalization

 Growth of Internet

 Greater bandwidth

 Compact mobile equipment

 Wireless networking

 Faster, more powerful software

 Digitization of text, graphics, audio, video

Government

Policies

Factors Stimulating Transformation

of the Service Economy

Business

Trends

Social

Changes Advances

In IT

Globalization

 More companies operating on transnational

basis

 Increased international travel

 International mergers and alliances

 “Offshoring” of customer service

 Foreign competitors invade domestic markets

Government

Policies

What are Services?

What Are Services?

• The historical view

– Smith (1776): Services are different from goods because they are

perishable

– Say (1803): As services are immaterial, consumption cannot be

separated from production

• A fresh perspective: Benefits without Ownership

– Rental of goods:

• (a) Payment made for using or accessing something – usually for a

defined period of time – instead of buying it outright and

• (b) Allows participation in network systems that individuals and

organizations could not afford

What Are Services?

Rented goods services

Defined space and place

rentals

Labor and expertise rentals

Access to shared physical environments

Access to and usage of

systems and networks

Five broad categories within non-ownership

framework of which two or more may be combined

Definition of Services

• Services

– are economic activities offered by one party to another

– most commonly employ time-based performances to bring about

desired results

• 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;

– normally do not take ownership of any of the physical elements

involved.

Value Creation is Dominated by

Intangible Elements

Physical Elements

High

Low High

Source; Adapted from Lynn Shostack

Salt

Detergents

CD Player

Wine

Golf Clubs

New Car

Tailored clothing

Fast-Food Restaurant

Plumbing Repair

Health Club

Airline Flight

Landscape Maintenance

Consulting

Life Insurance

Internet Banking

Intangible Elements

Service Products vs. Customer

Service & After-Sales Service

• A firm’s market offerings are divided into core product

elements and supplementary service elements

• Need to distinguish between:

– Marketing of services – when service is the core product

– Marketing through service – when good service increases the value

of a core physical good

• Manufacturing firms are reformulating and enhancing

existing added-value services to market them as stand-

alone core products

Service – A Process Perspective

• Differences exist amongst services depending on what is

being processed

• Classification of services into

– People processing

– Possession processing

– Mental stimulus processing

– Information processing

4 Categories of Services

Marketing Challenges Posed

by Services

Differences, Implications, and

Marketing-Related Tasks

Difference

 Most service products

cannot be inventoried

 Intangible elements

usually dominate

value creation

 Services are often

difficult to visualize &

understand

 Customers may be

involved in co-

production

Implications

 Customers may be

turned away

 Harder to evaluate

service & distinguish

from competitors

 Greater risk &

uncertainty perceived

 Interaction between

customer & provider;

poor task execution

could affect satisfaction

Marketing-Related Tasks

 Use pricing, promotion,

reservations to smooth

demand; work with ops to

manage capacity

 Emphasize physical clues,

employ metaphors and vivid

images in advertising

 Educate customers on

making good choices; offer

guarantees

 Develop user-friendly

equipment, facilities &

systems; train customers,

provide good support

Differences, Implications, and

Marketing-Related Tasks

Difference

 People may be part of

service experience

 Operational inputs and

outputs tend to vary

more widely

 Time factor often

assumes great

importance

 Distribution may take

place through

nonphysical channels

Implications

 Behavior of service

personnel & customers

can affect satisfaction

 Hard to maintain quality, consistency, reliability

 Difficult to shield customers from failures

 Time is money;

customers want service

at convenient times

 Electronic channels or

voice communications

Marketing-Related Tasks

 Recruit, train employees to reinforce service concept

 Shape customer behavior

 Redesign for simplicity and failure proofing

 Institute good service recovery procedures

 Find ways to compete on speed of delivery; offer

extended hours

 Create user-friendly, secure websites and free access by telephone

Extended Marketing Mix for

Services

Services Require

An Extended 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

Developing Effective Service

Marketing Strategies

Summary

Services dominate

the economy in many

nations. The majority

of jobs are created in

the service sector.

Services are often

intangible, difficult to

visualize and understand,

and customers may be

involved in co-production.

Unique

Characteristics

Why Study

Services?

Extended

Marketing

Mix

What are

Services?

Services are a form

of rental (not

ownership). They are

performances that

bring about a desired

result.

Product, Place & Time,

Price, Promotion &

Education, Process,

Physical Environment,

People

Post on the first online discussion.

Work on getting on canvas if not already on.

We will form groups and begin thinking of our group projects.

WHAT YOU NEED TO DO BEFORE WEEK TWO

Introduction to the Service

Industry, Service Economy, and

Customer Experience

Consumer Behavior

Washington State University

HBM494

Overview

• What are services?

• Why study service industry?

• Selected topics of Service Operation

Management

• Consumer behavior and the model of

consumption

What are Services?

What Are Services?

• Wikipedia definition

Service sector: A service is the non-material equivalent of

a good. Service provision is defined as an economic

activity that does not result in ownership, and this is what

differentiates it from providing physical goods. It is claimed

to be a process that creates benefits by facilitating either a

change in customers, a change in their physical

possessions, or a change in their intangible assets.

What are services?

What Are Services?

• The historical view

– No transfer of ownership

“Marketed services – a market transaction by an enter

prise where the object of the market transaction is oth

er than the transfer of ownership of a tangible commo

dity”

What are services?

Judd, R. C. (1964). The case for redefining services. Journ al of Marketing, 28(1), 58-59. p. 58

What Are Services?

• The historical view

– Three areas of service 1. the right to possess and use a product (Rented Goods

Services); or

2. the custom creation of, repair, or improvement of a

product (Owned Goods Services)

3. no product elements but rather an experience or what

might be termed experiential possession (Non-Goods

Services).

What are services?

Judd, R. C. (1964). The case for redefining services. Journ al of Marketing, 28(1), 58-59. p. 58

What Are Services?

• The historical view

– Service as non-Goods

What are services?

Tangible goods

Services as non- goods

Theories with goods-orientation

Largely ignored

What Are Services?

• Intangibility

• Heterogeneity

• Inseparability

• Perishability

IHIP framework

Zeithmal, Va.A., Parasuraman, A., & Berry, L. L. (1985). Problems and strategie s in services marketing. Journal of Marketing, 49, 33-46.

What Are Services?

• Intangibility: “Because services are performances, rather than objects, they can not be seen, tasted, or touched in the same

manner in which goods can be sensed.”

• Heterogeneity: “the quality and essence of a service (car rental,

restaurant meal) can vary from producer to producer, from

customer to customer, and from day to day.”

• Inseparability of production and consumption: “services are

first sold, then produced, and consumed simultaneously”

• Perishability: “services cannot be saved”

IHIP framework

What Are Services?

• Everything is service

“In short, service is the transcending, and thus the unifying, concept for understanding economic exchange in all economies (and all businesses). (p. 11) ... goods are appliances that act as intermediaries in service delivery. (p. 13)”

“the application of specialized competences (skills and knowle dge), through deeds, processes, and performances for the benefit of another entity or the entity itself (self-service)”

Everything is service

Lusch, R. F., & Vargo, S. L. (2014). Service-Dominant Logic. Cambridge: Cambridge University Press.

What Are Services? Service is everything

Tangible goods

Services as non- goods

Theories with goods-orientation

Goods as appliances

Service-dominant logic

Historical view Current view

Service

Value Creation is Dominated by Intangibl

e Elements

Physical Elements

High

Low High

Source; Adapted from Lynn Shostack

Salt

Detergents

CD Player

Wine

Golf Clubs

New Car

Tailored clothing

Fast-Food Restaurant

Plumbing Repair

Health Club

Airline Flight

Landscape Maintenance

Consulting

Life Insurance

Internet Banking

Intangible Elements

What Are Services? What are services?

Services Marketing

Why Study Services?

 Powerful forces are transforming service markets

 Government policies, social changes, business trends,

advances in IT, internationalization

 Forces that reshape:

 Demand

 Supply

 The competitive landscape

 Customers’ choices, power, and decision making

Services Marketing

Transformation of the

Service Economy

Government

Policies

Business

Trends

Social

Changes Advances

In IT

Globalization

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

Customers have more choices and exercise more power

 Understanding customers and competitors

 Viable business models

 Creation of value for customers and firm

 New markets and product categories

 Increase in demand for services

 More intense competition

Success hinges on:

Increased focus on services marketing and management

Services Marketing

Factors Stimulating Transformation

of the Service Economy

Government

Policies

Business

Trends

Social

Changes Advances

In IT

Globalization

 Changes in regulations

 Privatization

 New rules to protect customers, employees,

and the environment

 New agreement on trade in services

Services Marketing

Factors Stimulating Transformation

of the Service Economy

Business

Trends

Social

Changes Advances

In IT

Globalization

 Rising consumer expectations

 More affluence

 More people short of time

 Increased desire for buying experiences vs.

things

 Rising consumer ownership of high tech

equipment

 Easier access to information

 Immigration

 Growing but aging population

Government

Policies

Services Marketing

Factors Stimulating Transformation

of the Service Economy

Business

Trends

Social

Changes Advances

In IT

Globalization

 Push to increase shareholder value

 Emphasis on productivity and cost savings

 Manufacturers add value through service and

sell services

 More strategic alliances and outsourcing

 Focus on quality and customer satisfaction

 Growth of franchising

 Marketing emphasis by nonprofits

Government

Policies

Services Marketing

Factors Stimulating Transformation

of the Service Economy

Business

Trends

Social

Changes Advances

In IT

Globalization

 Growth of Internet

 Greater bandwidth

 Compact mobile equipment

 Wireless networking

 Faster, more powerful software

 Digitization of text, graphics, audio, video

Government

Policies

Services Marketing

Factors Stimulating Transformation

of the Service Economy

Business

Trends

Social

Changes Advances

In IT

Globalization

 More companies operating on transnational

basis

 Increased international travel

 International mergers and alliances

 “Offshoring” of customer service

 Foreign competitors invade domestic markets

Government

Policies

Why Study Services?

• Most new jobs are generated by services

– Fastest growth expected in knowledge-based industries

– Significant training and educational qualifications required,

but employees will be more highly compensated

– Will service jobs be lost to lower-cost countries? Yes, some service

jobs can be exported

What Are Services?

Rented goods services

Defined space and place

rentals

Labor and expertise rentals

Access to shared physical environments

Access to and usage of

systems and networks

Five broad categories within non-ownership framework of

which two or more may be combined

What Are Services? Types of services

Services Marketing

4 Categories of Services

Services Marketing

People Processing

 Customers must:

 physically enter the service factory

 cooperate actively with the service operation

 Managers should think about process and output from the customer’s perspective

 to identify benefits created and non-financial costs: Time, mental

and physical effort

Services Marketing

Possession Processing

 Involvement is limited

 Less physical involvement

 Production and consumption are separable

Services Marketing

Mental Stimulus Processing

 Ethical standards required:

 Customers might be manipulated

 Physical presence of recipients not required

 Core content of services is information-based

 Can be ‘inventoried’

Services Marketing

Information Processing

 Most intangible form of service

 May be transformed:

 Into enduring forms of service output

 Line between information processing and mental stimulus processing may be unclear

Definition of Services

• Brainstorm the examples of service industry. Try to categorize

them into several groups based on types of service such as

tangibility/intangibility, old/new, high/low ownership, etc.

• Discuss those examples you found with the classmates.

What Are Services? Examples of service industry

Definition of Services

• Consumer Services – Constitutes nearly 50% of all jobs in the U.S. – Retail, education, health and social services, leisure,

hospitality

• Business Services – Facilitates other businesses – Professional, financial, transportation

• Public Services – Provides security and protection of citizens/business – Federal, state, local government

What Are Services? Types of service sector

Service Products vs. Customer Service &

After-Sales Service What Are Services? Service sector by countries

Service Products vs. Customer Service &

After-Sales Service

• Beyond selling products – Manufacturing companies in developed economies can n

o longer compete on costs

– Face mature markets with a smaller room for growth

• Product-service system (PSS) – Integration of services and products

What Are Services? Servitization

Service Products vs. Customer Service &

After-Sales Service

• From selling shoes

• To selling the experience of running

– Sensors

– Wearable devices

– Smartphone apps

– Cloud services

What Are Services? Nike+

Why Study Services?

Why study services?

• Services dominate most economies and are growing rapidly:

– Services account for more than 60% of GDP worldwide

– Almost all economies have a substantial service sector

– Most new employment is provided by services

– Strongest growth area for marketing

• Understanding services offers you a personal competitive advantage

Contribution of Service Industries

to GDP Globally

Source: The World Factbook 2008, Central Intelligence Agency

Services 64%

Agriculture 4%

Manufacturing 32%

Value Added by Service Industry

Categories to U.S. GDP

SERVICES

Business Services

12%

Transport, Utilities

& Communications

Wholesale & Retai

l Trade 12%

Source: US Bureau of Economic Analysis, Industry Economics Accounts, 2007

Why study services?

• Services require a completely new mindsets

– You can not manage services like products

• Services are about people and their

relationships

– Deepest in its culture

Selected Issues of Service

Operation Management

Selected Issues of Service

Operation Management

• Managing Service Experiences

• Service Quality

• Service Blueprint

• Waiting Time Management

• Service Recovery

Managing Service Experiences

• Customer Engagement

• Context/ Time

• Service Blueprinting

Focus on moments of truth (MoT)

• Servicescapes

Service Quality

• Defining service quality is more difficult tha

n defining manufacturing quality.

– Expectation vs Perception

– Expectation vs Performance

Dimensions of Service Quality

• Reliability

• Responsiveness

• Assurance

• Empathy

• Tangibles

Parasuraman, et al., 1985

ACSI Site: http://www.theacsi.org/index.php?option=com_content&task=view&id=15&Itemid=172

http://www.theacsi.org/index.php?option=com_content&task=view&id=15&Itemid=172

Gaps in Service Quality

Service Blueprinting

Source: Metters, King-Metters, Pullman, & Walton, p. 84

Utility-based Service Design

• Waiting lines are pervasive in services

• The problem is important

• Lack of management intuition about waitin

g lines

• Use of technology in enhancing waiting tim

e management

Waiting Time Management

Service Recovery

• Measure the costs

• Listen closely for complaints

• Anticipate needs for recovery

• Act fast

• Train employees

• Empower front line

• Close the loop

Customer satisfaction

• Satisfied customers are the primary

goal for service management – Once they are satisfied, they will continue to

come back and recommend the service to

friends

• But what is customer satisfaction?

Customer satisfaction

“In essence, it is the summary psychological

state resulting when the emotion surrounding di sconfirmed expectation is coupled with the

consumer’s prior feelings about the

consumption experience.” (p. 27)

Oliver, R. L. (1981). Measurement and evaluation of satisfaction processes in retail settings. Journal of Retailing, 57(3), 25–48. “

Disconfirmation model

Oliver, R. L. (1981). Measurement and evaluation of satisfaction processes in retail settings. Journal of Retailing, 57(3), 25–48. “

Expectation formation

Expectation disconfirmation

Satisfaction

Expectation disconfirmation

• Positive disconfirmation -> Satisfaction

– A desirable event unlikely to occur occurs

– An undesirable event likely to occur does not

occur

• Negative disconfirmation -> Dissatisfaction

– A desirable event likely to occur does not occur

– An undesirable event unlikely to occur occurs

Customer delight

Expectation

Positive disconfirmation

Satisfaction

Surprise disconfirmation

Customer delight

Customer satisfaction by

service stages

Pre-purchase Stage

Service Encounter Stage

Post-encounter Stage

The Three-Stage Model of

Service Consumption

Pre-purchase stage

• Customers seek solutions to arou sed needs

• Evaluating a service may be diffic ult

• Uncertainty about outcomes Incr eases perceived risk

• What risk reduction strategies ca n service suppliers develop?

• Understanding customers’ service expectations

• Components of customer expect ations

• Making a service purchase decisi on

Pre-purchase Stage

Service Encounter Stage

Post-encounter Stage

Service encounter stage

Pre-purchase Stage

Service Encounter Stage

Post-encounter Stage

● Service encounters range from

high- to low-contact

● Understanding the servuction sy

stem

● Theater as a metaphor for servi

ce delivery: An integrative persp

ective

 Service facilities

 Personnel

 Role and script theories

The Flower of Service: Core plus

Supplementary Services (Fig. 4.4)

Core

Information

Consultation

Order-Taking

Hospitality

Payment

Billing

Exceptions

Safekeeping Facilitating

Enhancing

KEY:

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

Theater as a metaphor for

service delivery

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

Good metaphor as service delivery is a series of event s that customers experience as a performance

Post-encounter stage

Pre-purchase Stage

Service Encounter Stage

Post-encounter Stage

● Evaluation of service performance

● Future intentions

Summary

Pre-purchase Stage

Service Encounter St age

Post-encounter Stage • In evaluating service performan

ce, customers can have expecta

tions positively disconfirmed, c

onfirmed, or negatively disconfi

rmed

• Unexpectedly high levels of p erformance, arousal, and posi

tive affect are likely to lead to

delight

• Moments of Truth: importance of effectively managing touchp

oints

• High/low contact service model – understanding the extent and

nature of contact points

• Servuction model – variations of interactions

• Theater metaphor – “staging” s ervice performances

• Key Steps 1. Need arousal

2. Information search

3. Evaluation of alternative solu

tions

4. Purchase decision

• Customers face perceived risks which marketers should reduce

with some strategic responses

• Zone of tolerance: Adequate to desired. Dissatisfaction if servi

ce level falls below adequate le

vel.

Services Marketing

Chapter 4: Developing Service Products:

Core and Supplementary Elements

Services Marketing

For Next week: Week 4

 Read Chapter 3 on Positioning

 Service Quality assignment is due end of day July 26th this is an individual assignment.

 I will grade the Service Safari assignment.

 Turn in week 3 in class assignment TODAY

 The start of the, service design group project progress report.

Services Marketing

Overview of Chapter 4

 Planning and Creating Services

 The Flower of Service

 Branding Service Products and Experiences

 New Service Development

Services Marketing

Planning and Creating

Service Products

Pet Bar

Accessibility Consulting

Dementia Resort/Residence

Services Marketing

Service Products

A service product comprises of all elements of service performance,

both tangible and intangible, that create value for customers.

Service products consist of:

 Core Product  central component that supplies the principal, problem-solving benefits customers seek

 Supplementary Services  augments 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

Services Marketing

Designing a Service Concept

 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

Services Marketing

Documenting Delivery Sequence

Over Time

 Must address sequence in which customers will use each core and supplementary service

 Determine approximate length of time required for each step

 Information should reflect good understanding of customers, especially their:

 needs

 habits

 expectations

Services Marketing

Temporal Dimension to

Augmented Product

Before Visit

Reservation

internet

Parking Get car

Check in

Porter

Use Room

Meal Pay TV

Room service

Internet

Check out

Time Frame of an Overnight Hotel Stay (real-time service use)

USE GUESTROOM OVERNIGHT

Internet

Services Marketing

The Flower of Service

Services Marketing

The Flower of Service

 There are two types of supplementary services

 Facilitating: either needed for service delivery, or help in the use

of the core product

 Enhancing: add extra value for the customer

 In a 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

Services Marketing

The Flower of Service

Core

Information

Consultation

Order-Taking

Hospitality

Payment

Billing

Exceptions

Safekeeping

Enhancing elements

Facilitating elements

KEY:

Services Marketing

Facilitating Services – Information

• Directions to service site

• Schedules/service hours

• Prices

• Reminders

• Warnings

• Conditions of sale/service

• Notification of changes

• Documentation

• Confirmation of reservations

• Summaries of account

activities

• Receipts and tickets

Services Marketing

Facilitating Services – Order-Taking

Applications

• Memberships in clubs/programs

• Subscription services

(e.g., utilities)

• Prerequisite based services

(e.g., financial credit,

college enrollment)

Order Entry

• On-site order fulfillment

• Mail/telephone/e-mail/web order

Reservations and Check-in

• Seats/tables/rooms

• Vehicles or equipment rental

• Professional appointments

Services Marketing

Facilitating Services – Billing

• Periodic statements of account

activity

• Invoices for individual

transactions

• Verbal statements of amount due

• Self-billing (computed by

customer)

• Machine display of amount due

Services Marketing

Facilitating Services – Payment

Self-Service

• Insert card, cash or token into machine

• Electronic funds transfer

• Mail a check

• Enter credit card number online

Direct to Payee or Intermediary

• Cash handling or change giving

• Check handling

• Credit/charge/debit card handling

• Coupon redemption

Automatic Deduction from Financial

Deposits

• Automated systems (e.g., machine-

readable tickets that operate

entry gate)

• Human systems (e.g., toll collectors)

Services Marketing

Enhancing Services – Consultation

• Customized advice

• Personal counseling

• Tutoring/training in product use

• Management or technical

consulting

Services Marketing

Enhancing Services – Hospitality

Greeting

Food and beverages

Toilets and washrooms

Waiting facilities and

amenities

• Lounges, waiting areas,

seating

• Weather protection

• Magazines,

entertainment,

newspapers

Transport

Security

Services Marketing

Enhancing Services – Safekeeping

Caring for Possessions Customer Bring

with Them

• Child care, pet care

• Parking for vehicles, valet parking

• Coat rooms

• Baggage handling

• Storage space

• Safe deposit boxes

• Security personnel

Services Marketing

Enhancing Services – Safekeeping

(cont)

Caring for Goods Purchased (or

Rented) by Customers

• Packaging

• Pickup

• Transportation and delivery

• Installation

• Inspection and diagnosis

• Cleaning

• Refueling

• Preventive maintenance

• Repair and renovation

Services Marketing

Enhancing Services – Exceptions

Special Requests in Advance of Service

Delivery

• Children’s needs

• Dietary requirements

• Medical or disability needs

• Religious observances

Handling Special Communications

• Complaints

• Compliments

• Suggestions

Services Marketing

Enhancing Services – Exceptions

(cont)

Problem Solving

• Warranties and guarantees

• Resolving difficulties that arise

from using

the product

• Resolving difficulties caused

by accidents,

service failures

• Assisting customers who have

suffered an accident or a

medical emergency

Restitution

• Refunds and compensation

• Free repair of defective goods

Services Marketing

Managerial Implications

 Core products do not have to have supplementary elements

 Nature of product helps determine supplementary services offered to enhance value

 People-processing and high contact services have more supplementary services

 Different levels of service can add extra supplementary services for each upgrade in service level

 Low-cost, no-frills basis firms needs fewer supplementary elements

Services Marketing

Branding Service

Products and Experiences

Services Marketing

Service Products, Product Lines,

and Brands

 Service Product: A defined and consistent “bundle of output”

 Supported by supplementary services (assembly of elements that are built

around the core product)

 Differentiated by bundle of output

 Product Line: Most service organizations offer a line of products rather than just a single product.

 There are three broad alternatives for product lines:

 Single brand to cover all products and services

 A separate, stand-alone brand for each offering

 Some combination of these two extremes

Services Marketing

Spectrum of Branding Alternatives

Source: Derived from Aaker and Joachimsthaler

Services Marketing

Example:

British Airways Subbrands

British Airways offers seven distinct air travel products

Intercontinental Offerings Intra-European Offerings

First (Deluxe

Service)

Club World

(Business

Class)

World

Traveller Plus

(Premier

economy)

World

Traveller

(Economy)

Club Europe

(Business

Class)

Euro-

Traveller

(Economy)

Shuttle

Services Marketing

Offering a Branded Experience

Branding can be employed at corporate and product levels

 Corporate brand:

 Easily recognized,

 Holds meaning to customers,

 Stands for a particular way of doing business

 Product brand:

 Helps firm communicate distinctive experiences and benefits

associated with a specific service concept

Services Marketing

Moving Towards a Branded

Experience

Create brand promise

Shape truly differentiated

customer experience

Give employees skills, tools, and

supporting processes to

deliver promise

Measure and monitor

Services Marketing

Offering A Branded Experience

“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

Services Marketing

New Service Development

Services Marketing

A Hierarchy of

New Service Categories

Major Service Innovations: New core products for previously undefined markets

Major Process Innovations: Using new processes to deliver existing products with added benefits

Product Line Extensions: Addition to current product lines

Process-line Extensions: Alternative delivery procedures

Supplementary Service Innovations: Additions of new or improved facilitating or enhancing elements

Service Improvements: Modest changes in the performance of current products

Style Changes: Visible changes in service design or scripts

Services Marketing

Reengineering Service Processes

 Service processes affect customers and also cost, speed, and productivity

 Reengineering – analyzing and redesigning processes to achieve faster and better performance

 Examination of processes can lead to creation of alternative delivery methods:

 Add or eliminate supplementary services

 Re-sequence delivery of service elements

 Offer self-service options

Services Marketing

Creating Services as Substitutes

for Physical Good

 Drive Own Car

 Use Own Computer

 Rent a Car and Drive it

 Rent Use of Computer

 Hire a Chauffeur to Drive

 Hire a Typist to Type

 Hire a Taxi or Limousine

 Send Work out to a

Secretarial Service

Own a Physical Good Rent Use of Physical Good

Perform Work

Oneself

Hire Someone

to Do Work

Services Marketing

Success Factors in

New Service Development

 Market synergy

 Good fit between new product and firm’s image

 Advantage in meeting customers’ needs

 Strong support from firm during and after launch

 Understands customer purchase decision behavior

 Organizational factors

 Strong inter-functional cooperation and coordination

 Internal marketing to educate staff on new product and its

importance

Services Marketing

Success Factors in

New Service Development

 Market research factors

 Scientific studies

conducted early in

development process

 Product concept well

defined before

undertaking field studies

 This is what you will work

on Today!

Services Marketing

Summary

 Creating services involve:

 Designing the core product, supplementary services, and their

delivery processes

 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

Services Marketing

Summary

 Spectrum of branding alternatives exists for services

 Branded house

 Subbrands

 Endorsed brands

 House of brands

 To develop new services, we can

 Reengineer service processes

 Use physical goods as a source of new service ideas

 Use research to design new services

 Understand how to achieve success in new service development

Services Marketing

Chapter 5: Distributing Services

Through Physical And Electronic Channels

Services Marketing

Overview Of Chapter 5

 Distribution in a Services Context

 Options for Service Delivery

 Place and Time Decisions

 Delivering Services in Cyberspace

 The Role of Intermediaries

 The Challenge of Distribution in Large Domestic Markets

 Distributing Services Internationally

Services Marketing

Distribution in a Services

Context

Services Marketing

Distribution in a Services Context

 In a services context, we often don’t move physical

products

 Experiences, performances, and solutions are not being

physically shipped and

stored

 More and more informational transactions are conducted

through electronic and not

physical channels

Services Marketing

Applying the Flow Model of

Distribution to Services

The three interrelated elements of distribution are:

 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

Services Marketing

Distinguishing between Distribution

of Supplementary and Core Services

 Most core services require physical locations

 Many supplementary services are informational;

can be distributed widely

and cost-effectively via

other means

 Telephone

 Internet

Services Marketing

Information and Physical Processes

of Augmented Service Products

Services Marketing

Using Websites for Service Delivery

Order-Taking Make/confirm reservations

Submit applications

Order goods, check status

Safekeeping Track package movements

Check repair status

CORE: Use Web to deliver information-based core services

Core

Consultation Conduct e-mail dialog

Use expert systems

Hospitality Record preferences

Billing Receive bill

Make auction bid

Check account status

Exceptions Make special requests

Resolve problems

Payment Pay by bank card

Direct debit

Information Read brochure/FAQ; get schedules/

directions; check prices

Services Marketing

Options for Service Delivery

Services Marketing

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

 Unavoidable when object of service is immovable

 More expensive and time-consuming for service provider

 Service transaction is conducted remotely

 Achieved with help of logistics and telecommunications

Services Marketing

Six Options For Service Delivery

Services Marketing

Channel Preferences Vary Among

Customers

 For complex and high-perceived risk services, people tend to rely on personal channels

 Individuals with greater confidence and knowledge about a service/channel tend to use impersonal and self-service

channels

 Customers with social motives tend to use personal channels

 Convenience is a key driver of channel choice

Services Marketing

Place and Time Decisions

Services Marketing

Place Decisions of Service Delivery

 Cost, productivity, and access to labor are key determinants to locating a service facility

 Location constraints

 Operational requirement (e.g., airports)

 Geographic factor (e.g., ski resorts)

 Need for economies of scale (e.g., hospitals)

Services Marketing

Place Decisions of Service Delivery

 Ministores

 Creating many small service factories to maximize geographic

coverage

 Separating front and back stages of operation

 Purchasing space from another provider in complementary field

 Locating in Multipurpose Facilities

 Proximity to where customers live or work

- Service Stations

- Service Perspectives 5.2

Services Marketing

Time of Service Delivery

 Traditionally, schedules were restricted

 Service availability limited to

daytime, 40-50 hours a week

 Today

 For flexible, responsive

service operations: 24/7

service, 24 hours a day, 7

days a week, all around the

world

Services Marketing

Delivering Services in

Cyberspace

Services Marketing

Service Delivery Innovations

Facilitated by Technology

 Technological Innovations

 Development of “smart” mobile telephones and PDAs, and

presence of Wi-Fi

 Voice-recognition technology

 Websites

 Smart cards - Store detailed information about customer

- Act as electronic purse containing digital money

 Electronic channels can be offered together with physical channels, or replace physical channels

Services Marketing

E-Commerce: Move to Cyberspace

 What are the factors that encourage you to use virtual stores?

 Convenience

 Ease of search

 Broader selection

 Potential for better prices

 24-hour service with prompt delivery

Services Marketing

E-Commerce: Move to Cyberspace

 Recent developments: websites, customer management (CRM) systems, and mobile telephony

 Integrating mobile devices into the service delivery infrastructure can be used as means to:

 Access services

 Alert customers to opportunities/problems

 Update information in real time

Services Marketing

Role of Intermediaries

Services Marketing

Splitting Responsibilities

for Service Delivery

Challenges for original supplier

● Act as guardian of overall process ● Ensure that each element offered by intermediaries fits overall service concept

Services Marketing

Franchising

 Franchisor provides training, equipment, and support marketing activities.

 Franchisees invest time and finance, and follow copy and media guidelines of franchisor.

 Advantages:

 Expand delivery of effective service concept without a high level of

monetary investment

 Franchisees are motivated to ensure good customer service and

high-quality service operations

Services Marketing

Franchising

 Disadvantages of franchising

 Loss of control over delivery system and how customers

experience actual service

 Effective quality control is difficult

 Conflict between franchisees may arise especially as they gain

experience

 Alternative: license another supplier to act on the original supplier’s behalf to deliver core product

 Trucking companies

 Banks selling insurance products

Services Marketing

Challenge of Distribution in

Large Domestic Markets

Services Marketing

The Challenge of Distribution in

Large Domestic Markets

 Distributing services (i.e., physical logistics) faces challenges due to:

 Distances involved

 Multiple time zones

 Multiculturalism

 Differences in laws and tax rates

Services Marketing

Distributing Services

Internationally

Services Marketing

Factors Favoring Adoption of

Transnational Strategies

Transnational strategy involves integration of strategy

formulation and its implementation across all countries in

which company elects to do business

 Market Drivers

 Common customer needs across countries

 Corporate customers seek to standardize and simplify suppliers used in

different countries – ad agencies, logistics suppliers, Big 4 accounting

firms

 Government Drivers

 Favorable trade policies, compatible technical standards, common

marketing regulations

Services Marketing

Factors Favoring Adoption of

Transnational Strategies

 Competition Drivers

 Competitors from overseas; interdependence of countries

 Firms may be obliged to follow competitors into new markets to protect

own positions elsewhere

 Technology Drivers

 Advances in information technology – miniaturization and mobility of

equipment, digitization of voice

 Cost Drivers

 Economies of scale

 Lower operating costs

Services Marketing

How Service Processes Affect

International Market Entry

 People processing services require direct contact with customers

 Export service concept

- Acting alone or in partnership with local suppliers

e.g., chain restaurants, hotels, car rental firms

 Import customers

- Inviting customers from overseas to firm’s home country

e.g., hospitals catering to “medical tourism”

 Transport customers to new locations

- Passenger transportation (air, sea, rail, road)

Services Marketing

How Service Processes Affect

International Market Entry

 Possession processing involves services to customer’s physical possessions

- Repair and maintenance, freight transport

 Information-based services include mental processing services and information processing services

 Export the service to a local service factory - Hollywood film shown around the world

 Import customers

 Export the information via telecommunications and transform it

locally - Data can be downloaded via CDs or DVDs

Services Marketing

Impact of Globalization Drivers on

Various Service Categories

Globalization Drivers

People Processing Possession Processing

Information Based

Competition Simultaneity of production and consumption limits leverage of foreign competitive advantage, but management systems can be globalized.

Technology drives globalization of competitors with technical edge.

Highly vulnerable to global dominance by competitors with monopoly or competitive advantage in information.

Market People differ economically and culturally, so needs for service and ability to pay may vary.

Level of economic development impacts demand for services to individually owned goods.

Demand for many services is derived to a significant degree from economic and educational levels.

Services Marketing

Impact of Globalization Drivers on

Various Service Categories

Globalization Drivers

People Processing Possession Processing

Information Based

Technology Use of IT for delivery of supplementary services may be a function of ownership and familiarity with technology.

Need for technology- based service delivery systems depends on possessions requiring service and the cost trade-offs in labor substitution

Ability to deliver core services through remote terminals may be a function of investment in computerization, etc.

Cost Variable labor rates may impact pricing in labor- sensitive services.

Variable labor rates may favor low-cost locations.

Major cost elements can be centralized and minor cost elements localized.

Government Social policies (e.g., health) vary widely and may affect labor cost, etc.

Policies may decrease/increase cost and encourage/discourage certain activities

Policies may impact demand and supply and distort pricing

Services Marketing

Barriers to International Trade in

Services

 Passage of free-trade legislation is important facilitator of transnational operations

 Notable developments: NAFTA, Latin American economic blocs,

 Despite efforts of WTO and GATT, barriers still exist:

 Restrictions on international airline operating rights

 Heavy taxation

 Legal restrictions

 Lack of broadly agreed upon accounting standards

 Cultural issues

Services Marketing

Summary

 Distribution relates to both core and supplementary services and embraces three interrelated elements

 Information and promotion flow, negotiation flow, product flow

 Channel options include:

 Customers visit the service site

 Service providers go to their customers

 Service transaction is conducted remotely

 Place and time decisions include where services should be delivered in bricks-and-mortar context, when it should be

delivered

Services Marketing

Summary

 Delivery in cyberspace is facilitated by technology; e-commerce allows 24-hour delivery, saving time and effort

 Intermediaries play roles in distributing services

 Service processes (people processing services, possession processing services, and information-based services) affect

international market entry via the drivers:

 Market drivers

 Competition drivers

 Technology drivers

 Cost drivers

 Government drivers

Overview of Chapeter 3erview of

Chapter 3

• Focus Strategies for Services

• Market Segmentation

• Service Attributes and Levels

• Positioning Distinguishes a Brand from its Competitors

• Developing an Effective Positioning Strategy

• Using Positioning Maps to Analyze Competitive Strategy

• Changing Competitive Positioning

Focused Strategies for

Services

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

Considerations for using Focused

Strategies

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 is too small to

generate needed volume

 Demand may be displaced

by generic competition

from alternative products

 Purchasers in chosen

segment may be

susceptible to economic

downturn

Considerations for using Focused

Strategies

• Market focused

– Narrow market segment with wide range of services

– Need to make sure firms have operational capability to do and

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 (quickbooks?)

– As new segments are added, firm needs to develop knowledge and

skills in serving each segment

Considerations for Using

Focus Strategies

• Unfocused

– Broad markets with wide

range of services

– Many service providers fall

into this category

– Danger – becoming a “jack of

all trades and master of none”

Market Segmentation

• Firms vary widely in their abilities to serve different types of

customers

• A market segment is composed of a group of buyers sharing

common characteristics, needs, purchasing behavior, and

consumption patterns

• WHAT MARKET ARE WE IN? FOR WHOM AM I TRYING TO

DO WHAT?

• 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

Market Segmentation• Target market: The group of people an operation intends to pursue as customers

• Identifying a target market enables organizations to:

– Provide the products and services needed

– Avoid mass marketing, in which everyone in the market is treated as having the same needs and wants

– Focus on target marketing, which treats people as different from each other and tries to make a focused appeal to a distinct group of customers

7.2

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

Establishing Service Levels

• Make decisions on service levels – level of performance firm

plans to offer on each attribute

– Easily quantified attributes are easier to understand – e.g., vehicle speed,

physical dimensions

– Qualitative attributes subject to individual interpretation – e.g., physical

comfort, noise levels

• Can often segment customers according to willingness to trade

off price versus service level:

– Price-insensitive customers willing to pay relatively high price for high levels

of service

– Price-sensitive customers look for inexpensive service with relatively low

performance

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 people – must focus

its efforts

Principles of Positioning

Avoid trap of investing too

heavily in points of differences that are

easily copied!

What does our firm stand for in

the minds of current and

potential customers?

What customers do we serve now, and which ones would we like to

target?

What is value proposition for

our current service products,

and market segments?

How does each of our service

products differ from

competitors’? How well do target customers perceive

our service products as

meeting their needs?

What changes must we make to

strengthen our competitive

position?

Developing an Effective

Positioning Strategy

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

Developing an Effective Positioning

Strategy

• 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

Positioning creates a clear, specific identity for both a product and the operation within the marketplace. The goal is to stand out in the crowd.

• Positioning consists of three steps:

– Identify possible ways to differentiate the operation within the market, to create a unique identity.

– Select the right mix of differentiating aspects.

– Communicate the chosen identity to a specific target market.

Creating a Market Identity

7.2

Ways to Differentiate an Operation

To differentiate an operation from its competitors and create a unique identity, managers can look at the following:

• Product: The first and most obvious way to position an operation in the market is through the product it offers.

• Physical appearance/aesthetics: Use the actual physical space of an operation tocreate an image.

• Location: Location can play a big part in creating an identity.

• Image: Another way to differentiate an operation is through its image.

7.2

Segmentation

- As marketers we must determine which part of the market we are going to focus on:

To do this, marketers divide up the entire market into groups based on

some shared characteristics.

These groups are called market segments.

Market segments consist of consumers who respond in a similar way to a given set of stimuli (Kotler 1986).

Segmentation

- Meaningfully Defined:

A) Geographic

D) Behavioristic - Usage Rate - Benefits Sought - Brand Loyalty - Usage Ocassions

B) Demographic

C) Psychographic (lifestyles)- AIO

Segmentation

- Marketers create a segment profile for each segment:

Segment profile is the “typical” person from that segment.

Once segment is created, a marketer must determine which segment they intend to target.

Target Marketing Strategies

- Evaluating possible targeting strategies: Market with 5 different segments.

1 5

3 4

Target Marketing Strategies

- Types of strategies:

1) Undifferentiated- one strategy for everyone (mass marketing)

1 5

3 4

Target Marketing Strategies

- Types of strategies:

2) Differentiated- different product offerings for each segment

1 5

3 4

Target Marketing Strategies

- Types of strategies:

3) Concentrated- only focusing on one segment (do what you do best). Most companies start with this.

1 5

3 4

Target Marketing Strategies

Which is the best strategy to use?

- cost, expertise, strategic focus

Why not use differentiated all the time?

Product Positioning

Why do we care how our product is positioned?

Use the perceptual map to determine the best marketing mix strategy.

Using Positioning Maps to

Analyze Competitive Strategy

Using Positioning Maps to Plot

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

• Information about a product can be obtained from market data,

derived from ratings by representative consumers, or both

• Difference between Position map and perception

Positioning of Hotels in Belleville:

Price vs. Service Level

Expensive

Shangri-La High

Service Moderate Service

Grand

Regency

Sheraton

Italia

Castle Alexander IV

Airport Plaza

PALACE

Atlantic

Less Expensive

Positioning of Hotels in Belleville:

Location vs. Physical Luxury

High Luxury

Shopping District and Convention Center

Shangri-La

Moderate Luxury

Financial District

Inner Suburbs

Grand Regency

Sheraton

ItaliaCastle

Alexander IV

Airport Plaza

PALACE

Atlantic

Positioning After New Construction:

Price vs. Service Level

Expensive

Shangri-La

High Service

Moderate Service

Heritage Mandarin

New Grand

Marriott Continental

Regency

Sheraton

Italia

Alexander IV

Airport Plaza

PALACE

Atlantic

No action?

Action?

Less Expensive

Castle

Positioning After New Construction:

Location vs. Physical Luxury

High Luxury

Shangri-La

Financial District

Inner Suburbs

Heritage

Mandarin

New Grand

Marriott Continental

Regency Sheraton

Italia

Alexander IV

Airport Plaza

PALACE

Atlantic

No action?

Action?

Moderate Luxury

Castle

Shopping District and Convention Center

FOR WHOM ARE YOU TRYING TO DO WHAT? WHERE DO YOU FIT IN?

Product Positioning

Positioning your product

Positioning is the place a product or brand occupies in the consumer’s mind on important attributes, relative to competitive offerings.

Every product contains a bundle of perceived attributes.

Product Positioning

These attributes help a consumer position a product relative to the attributes.

The use of these attributes in positioning helps develop a perceptual map for the customer.

Encoding information

• Increased retention when associated with attributes already in our brain

• Types of meaning – Sensory meaning- assign meaning to shape or

color: activated by picture

– Semantic meaning- symbolic associations

• Personal Relevance – Increases memory of products or events

– Flashbulb memories (your 16th birthday)

Storage of information

• Three types of memory systems – Sensory Memory: temporary storage of things

from our senses, e.g. Cinnabon – Short-term memory: stores for limited period

of time – Long-term memory: information stored for

lengthy periods • More effort it takes to process the more likely it will

go to LTM • Associated networks of information/ spreading

activation • Semantic priming- symbolic associations help you

recall info

Anticipating Competitive Response

• Competitors might pursue same market position

– Independently do same positioning analysis and arrive at similar

conclusions

– Threatened by new strategy, take steps to reposition own service

– New entrant plays “follow the leader”

• Conduct internal corporate analysis for challengers and analyze

possible effects of alternative moves

– Impact of price cut on demand, market share, and profits

– Responses of different segments to changes in service attributes

Positioning Maps Help Managers to

Visualize Strategy

• Research provides input 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

• Charts and maps can facilitate “visual awakening” to threats

and opportunities, suggest alternative strategic directions

Changing Competitive

Positioning

Repositioning

• Firm may have to make significant change in existing

position

– Revising service characteristics; redefining target market segments;

abandoning certain products; withdrawing from certain market

segments

• Improving negative brand perceptions may require

extensive redesign of core product

• Repositioning introduces new dimensions into positioning

equation that other firms cannot immediately match

Summary

• Focus Strategies:

– Fully focused

– Service focused

– Market focused

– Unfocused

• Market Segmentation – buyers share common

characteristics, needs, purchasing behavior & consumption

patterns

• Service attributes – determinant attributes are often the

ones most important to customers

Summary

• Positioning links:

– Market Analysis

– Internal Analysis

– Competitive Analysis

• Positioning maps are useful for plotting competitive strategy:

– Identify potential competitive responses

– Help executives to visualize strategy