Health Services Marketing 4-6 Discussions
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Week5LectureSlides.pptHealth Services Marketing
HSA 305
Market Segmentation, Targeting, Positioning, and Competition
Kotler, P., Shalowitz, J., & Stevens, R. J. (2008). Strategic marketing for health care organizations. San
Francisco: Jossey-Bass
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Welcome to Health Services Marketing. In this lesson, we will discuss
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Objectives
- Upon completion of this lesson, you will be able to:
- Analyze the competitive environment of a health services organization and prepare a course of action that will allow for strategic marketing success.
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Upon completion of this lesson, you will be able to:
Analyze the competitive environment of a health services organization and prepare a course of action that will allow for strategic marketing success.
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Market Segmentation
- Segment marketing
- Niche marketing
- Local marketing
- Patterns
There is a shift from mass marketing to micromarketing. There are four levels of micromarketing: segments, niches, local areas, and individuals.
Segment marketing- a market is comprise of a group of people with a similar set of needs and desires. Since the wants of segment members are similar but not the same, flexible marketing offering should be used. Flexible marketing offering is the product and service components that all segment members value with discretionary options that some members value.
Niche marketing. A niche is a customer group looking a distinctive mix of benefits. A niche can be identified by dividing a segment into subsegments. Niches are smaller than segments and may attract less competition.
Local marketing. In this type tailors to the needs and wants of local customer groups. This type implements grassroots marketing and other methods that concentrates on getting up close and personal to individual customers.
Preference segments is one way of defining market segments. Three different patterns can be discovered with preference segments:
Homogeneous preferences illustrate that consumers have basically the same preferences.
Diffused preferences illustrate that consumer preferences may be scattered with the field of possibilities.
And
Clustered preferences illustrates natural market segments or formation of distinct preference clusters .
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Segmentation of Consumer Markets
- Geographic Segmentation
- Demographic Segmentation
- Psychographic Segmentation
- Behavioral Segmentation
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Geographic segmentation divides market into different geographic units such as nations, states, regions, countries, cities, or neighborhoods.
Demographic segmentation is the most popular method that divides the market into groups based on age and other demographic variables. This method is popular because consumers wants, preferences, and usage rates are commonly associated with demographic variables of which are easy to measure. The most common demographic categories used to segment markets are age and life cycle stage, life stage, gender, disease, organ system, or diagnostic category, payer mix, income, generation, and social class.
Psychographic segmentation is based on psychographics- the science of using psychology and demographics to obtain a better understanding of consumers. In this type of segmentation, the buyers are divided into different groups on the basis of lifestyle, personality, or values. There are four groups of people with ample resources: innovators, thinkers, achievers, and experiencers. There are four groups of people with more limited resources: believers, strivers, makers, and strugglers.
Behavioral segmentation. In this method buyers are divided into groups based on their knowledge of , attitude toward, use of, or response to a product. In this method, people play five roles in a buying decision: initiator, influencer, decider, payer, and user. At times, occasions, benefits, user status, usage rate, loyalty status, buyer-readiness stage, and attitude are good starting pints for building markets.
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Check Your Understanding
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Segmentation Of Business Markets
- Organization size
- Geographic location
- Interest profile
- Resource level
- Buying criteria
- Buying process
The business markets can be segmented in some of the same variables implemented in consumer market segmentation. However, it must also use other variables such as organization size, geographic location, interest profile, resource level, buying criteria, and buying process.
Businesses can be segmented by size based on revenue, the number of employees, market share, and other variables. There can be geographic divisions established within the same city, county, or even a one hundred mile radius. Organizations differ by the amount of funding they are willing to invest in specific programs. In addition, organizations differ in the quality of products and services they prefer. Organization vary with regards to the amount of documentation they require and the time period in terms of making buying decisions.
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Sequential Segmentation
- First time prospects
- Novices
- Sophisticates
Sequential segmentation is another way of identifying markets. An organization may take a macrosegmentation approach. However, after it considers several markets, it chose to emphasize on a given market such as women’s health and of which it may need to determine the most attractive mix within that category such as disease prevention, disease diagnosis, nonsurgical and surgical treatment and rehabilitation. If it decided to focus on breast health, then the best geographic location , choosing small cities close to major transportation hubs and without competition. In terms of benefit bundles, business buyers may also seek different ones based n their stage in the purchase decision process. The stages are as follows:
First time prospects are customers who have not purchased but want to buy from a vendor who understands their business, who explains things well, and whom they trust. They prefer to deal with a company sales person in stead of a catalog or direct mail channel due to the catalog or direct mail channel provide less information and do not provide a sense of comfort.
Novices are customers who are starting their purchasing relationship and want easy to read manuals, hotlines, a high level of training, and knowledgeable sales representatives.
Sophisticates are established customers who want speed in maintenance and repair, product customization, and good technical support. Theses customers may want to buy over electronic channels.
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Market Targeting
- Effective segmentation Criteria
- Evaluating and Selecting Market Segments
- Additional Considerations
After an organization has identified its market segment opportunities, it has to decide how many and which target to pursue. One strategy is to combine several variables to identify smaller and better defined target groups. A health information systems organization can identify a group or large health systems as well as be able to distinguish many segments with in that sub grouping. Effective segmentation criteria have the key five attributes:
Measurable.
Substantial.
Accessible
Differentiable
And
Actionable
Two factors need to be examined when evaluating different market segments:
One. The segment’s overall attractiveness
And
Two. The organization’s objectives and resources.
When evaluating and selecting market segments, the following need to be taken into consideration:
Single-segment concentration. An organization can choose to focus on a concentrated marketing approach where it gains a significant amount of knowledge of its target segment’s needs and behaviors. Hence achieving a strong market presence and gain operating economies by specializing in the segment’s products needs, channels, and promotion. The caveat to this is that a concentrated market involves risks such as a particular marketing’s segment not doing well as a result of changes in buying patterns or new competition. In this case, many organization may prefer to operate in more than one market.
Selective specialization. This approach is making products for a selected number of segment. Although there may not be any synergy among the selected markets, each are predicted to be profitable.
Product specialization. This approach is to specialize in a product over several segments with minor differences to meet each segment’s needs.
Market specialization. This approach focuses on serving the many needs of particular customer group. The organization obtains a strong reputation in serving this customer group and becomes a channel for more products that that organization can use.
Full market coverage. This approach attempts to serve all customers groups with all the products they may need. This may be achieved in two ways:
One. Undifferentiated marketing is when an organization ignores segment differences and goes after the entire market with only one offer. The product and market programs are designed to appeal to the broadest number of buyers. The organization implements mass distribution with mass advertising to create a superior product. This type of marketing reduces the cost of research and development, production, inventory, transportation, market research, advertising, and product management.
Two. Differentiated marketing is when the organization operates in many market segments and designs different products for each segment. Segment managers should be appointed to manage the multiple segments.
In addition to single segment concentration, selective specialization, product specialization, market specialization and full market coverage, segment by segment invasion, updating segmentation schemes, and ethical choice of market targets should be taken into consideration in evaluating and selecting segments. Segment by segment invasion indicates that an organization should enter a segment without letting the competition know which segments will be next. It is important that an invasion plan be developed for long term segment entry. Updating segmentation schemes should be done in order to discover new segments. This is achieved by investigating the hierarchy of attributes consumers analyze in selecting a brand or market partitioning. Ethical choice of market targets is regarding the public’s concern regarding when marketers take unfair advantage of vulnerable groups such as children or disadvantage groups such as inner city poor people or promote possible harmful products.
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Check Your Understanding
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Market Positioning
- Competitive Frame of Reference
- Points of parity and points of difference
- Establishing category membership
Marketing strategy must be constructed with careful consideration of segmentation, targeting and positioning (STP). An organization does the following:
First. Discovers different needs and groups in the marketplace.
Second. Targets those needs and groups it can satisfy the most.
Third. Positions its offering where the target market recognizes the organization’s unique offering and image.
Positioning is the undertaking of designing the organization’s offering and image to inhabit a distinctive place in the mind of the target market. Good positioning can assist marketing strategy by clarifying the brand’s essence, what goals it helps the consumer achieve, and how it does so in a unique way. This can result in customer focused value proposition.
While many products may be the same, successful organizations will position their offerings by highlighting the similarities and differences between brands. In order to decide on a positioning strategy, the organization has to determine a competitive frame of reference by identifying the target market, the nature of the competition, and the ideal points of parity and points of difference in brand links. The starting point is to determine category membership (the products with which a brand competes and that function as close substitutes). The resources, capabilities, and likely intentions of various other organizations are considered through a competitive analysis.
Points of parity are links that re not necessarily unique to the brand, but may be shared with other brands. There are two basic forms:
Category points of parity are links consumers perceive as important to be a legitimate and credible offering within a specific category. Category points of parity can change over time due to technological advances, legal developments, or consumer trends. An example is home health agencies may also need to provide infusion therapies to fit into this category.
Competitive points of parity are links designed to go against competitors’ points of difference. Customers must believe that the brand is good enough on a given dimension in order for a specific brand to achieve the advantage over the competition.
Establishing category membership. It is essential for consumers to understand what brand stands for and not only what is it not. Ideally, an organization would prefer that the consumers are informed of a brand’s membership prior to stating its point of difference. Consumers need to know what a product is and what function it services prior to deciding whether it combines the brands against the ones it competes against. There are three ways to communicating a brand’s category membership:
Announcing category benefits
Comparing to exemplars
And relying on the products descriptor.
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Market Positioning-continued
- Choosing points of parity and points of difference
- Creating points of parity and points of difference
- Differentiation strategies
There are two essential considerations in choosing points of difference:
One. That consumers find desirable
And
Two. An organization has the capabilities to deliver on the points of difference
There are three key consumer desirability criteria for target customers:
The product must be personally
Relevant
Distinctive
And
Believable.
There are three key deliverability criteria for points of difference:
Feasibility
Communicability
And
Sustainability.
In essence, positioning must be preemptive, defensible, and difficult to attack.
One of the common issue of creating a strong competitive position is that many of the benefits that make up the points of parity and points of difference are negatively connected. An expensive effective approach to this issue is to laugh two different marketing campaigns with each one devoted to a different brand benefit.
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Differentiation Strategies
- Product
- Services
- Personnel
- Channel
- Image
Differentiation Strategies
Products must be differentiated to be branded. This means that the differentiation can be based on the characteristics of the product; however, it must go through attributes of personnel, channels, and images. Products can be differentiated by the following attributes:
Form
Features
Performance quality
Conformance quality
Durability
Reliability
Reparability
Style
And
Design.
Service Differentiation. Value added services and improved quality is the key to competitive when the physical product cannot be easily differentiated:
Ordering ease
Delivery
Installation
Customer training
Customer consulting
Maintenance and repair
Personnel. An organization can gain a strong competitive advantage through its employees. A more satisfied workforce is more productive and communicates a positive image to its customers. Some attributes of superior organizations include the following:
Competent
Respectful and considerate
Credible
Reliable
Responsive
And
Able to understand customers and communicates clearly.
Channel. Organization can achieve a competitive advantage by the way they design their distribution channel coverage, expertise, and performance.
Image. Is the way the public sees the organization and its products and services. Effective images establish the offering’s characters and value proposition, communicates its character in a unique way, and delivers emotional power that transcends a mental image.
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Industry Concept of Competition
- Industries categories
- Number of sellers
- Degree of product differentiation
- Presence or absence of entry, mobility, and exit barriers
- Cost structure
- Degree of vertical integration
- Degree of globalization
The health care industry is dynamic. An organization may face injury from emerging competition or new technologies. Therefore, the range of an organization’s potential and actual competitors is broader than it appears.
An industry is a group of organizations that provides a product or class of products that are close substitutions to each other. Industries are categorized by the number of sellers, degree of product differentiation, presence or absence of entry, mobility, and exit barriers; cost structure; degree of vertical integration; and degree of globalization. We will only discuss the number of sellers and degree of vertical integration.
The number of sellers. This is the beginning point in which the number of sellers and a determination of whether the product is homogeneous or highly differentiated. There are four industry structure types:
Pure monopoly is when only one organization provides a certain offering in a specific area. Monopolistic competition is that many competitors are able to differentiate their offers in whole or in part. Pure competition is when competitors offer the same product and service so without differentiation, all prices will be the same.
Oligopoly is when a small number of usually large organizations produce offerings that range from highly differentiated to standardized. Pure oligopoly is when few organizations produce the same commodity such as gas, so all have a hard time charging more than the going price. Differentiated oligopoly is when a few organizations such as hospitals put forward offerings partially differentiated by quality, features, style, or services.
Degree of product differentiation. In many organization benefit from vertical integration or integrating backward or forward to offer a total solution that is advantageous. It lowers cost and the firm gains a greater market share of the value added stream.
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Competition
- Market concept of competition
- Analyzing competitors
- Strategies
- Objectives
- Strengths and Weaknesses
- Selecting competitors
- Competitive strategy
- Balancing customer and competitor orientation
Once the organization has been identified the primary competitors, it must determine their strategies, objectives, strengths and weaknesses. A strategy group is a group of organizations following the same strategy in a specific target market. If an organization wants to enter a specific industry, then its strategic group discovers a range of possibilities that can be characterized by the dimensions of product quality and level of vertical integration. Once the main competitors and their strategies have been identified, then their objectives to include size, history, current management, and financial situation need to be determined. When examining the competition, an organization need to be mindful of the following variables:
Share of market
Share of mind
And
Share of heart.
Selecting competitors.
Strong versus weak
Close versus distant
Good versus bad.
Competitive Strategy
Market leader strategies. A small number of organizations are acknowledged market leaders with following traits:
Having the largest market share
Leading the other organizations in price changes, new products introductions, distribution coverage, and promotional intensity
And
Being opinion or thought leaders.
The lasting market leader calls for action on three fronts:
One. Expanding the total market
Two. Protecting its current market share through good defensive and offensive actions. A dominant organization has a choice of six defensive strategies: position defense, flank defense, preemptive defense, counteroffensive defense, mobile defensive, and contraction defense.
And
Three. Trying to increase its market share can increase profitability by increasing their market share. An organization will consider the following four factors prior to pursing increased market share:
One. The possibility of provoking antitrust action.
Two. Economic cost.
Three. Pursuing the wrong marketing mix strategy
And
Four. The effect of increased market share on actual and perceived quality.
Other competitive strategies
Five general market challenger options:
Frontal attack. This is the opponent’s product, advertising, price and distribution are matched.
Flank attack. This is when the shifts in the market segments that are causing gaps to developed so that the gaps can be filled and developed them into stronger segments.
Encirclement attack. This is used to capture a side piece of the opponent’s territory through a blitz.
Bypass attack. This is the most indirect assault strategy that involves bypassing the opponent and attacking easier markets to broaden the resource base. There are three lines of approach: diversifying into unrelated products, diversifying into new geographical markets, and leapfrogging into new technologies to replace existing products. Technological leapfrogging is a bypassing strategy used in high tech industries.
Guerrilla warfare. This is comprised of small transitional attacks with the purpose of harassing and demoralizing the opponent to secure permanent grips.
Market follower strategies. This is when a product imitation is used to achieve high profits without acquiring the innovation expense.
Market nicher strategies are alternatives to being a follower in a large market where the focus is on being the leader in a small market.
Three tasks of nichers: creating niches, expanding niches, and protecting niches. The key idea in nichemanship is specialization such as the following:
End user
Vertical level
Customer size
Specific customer
Geographic
Product or product line
Product feature specialist
Job shop
Quality price specialist
Service
And
Channel
It is important for organizations to be a customer centered company that places emphasis on customer developments in formulating its strategies and not just on the competition to balance customer and competitor orientation. A customer centered organization is in a better position in identifying new opportunities and set a strategy for long term profits. By continuously monitoring customer needs, the organization can decide which customer groups and occurring needs are most important to serve, provided its resources and objectives.
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Check Your Understanding
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Summary
- Market levels
- Consumer market
- Deciding target segments
- Competitors’ analysis
- Balancing customer and competitor focus.
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We have now reached the end of this lesson. Let’s take a look at what we’ve covered.
First, we discussed the markets can be viewed by four levels:
Mass
Segment
Niche
Or
Local markets.
In addition, the consumer market can be segmented
Geographically
Demographically
Psychologically
And
Behaviorally.
Next, we discussed that organizations have to make decisions regarding on which and how many segments to target. They can choose any of the following:
Single segmentation
Selective specialization
Product specialization
Market specialization
And
Full market coverage.
After the choice have been made, then the organization have to prepare a segment by segment invasion plan and update the segmentation basis periodically while adhering to the ethical principles of its choices of target markets. From this, each target market, the organization has to develop a positioning implementing points of parity and points of difference. Differentiation can be established on product, service, channels, or image.
Finally, we discussed that the organization’s strategy have to be developed from examining who the competitors are and identifying their objectives, strategies, strengths and weaknesses. A leading organization will target to maintain leadership by expanding the total market, defending its market share, and expanding its market share. Others may choose to challenge the leader, follow the leader, or enter a narrow niche. Although an organization should monitor its competitor’s actions, it must be cognizant to maintain a stronger focus on its target customers’ current and changing needs.
This concludes this lecture.
