Services Marketing:

People, Technology, Strategy

CHAPTER 3
Positioning Services in Competitive
Markets

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Integrated Model of Services
Marketing

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Learning Objectives
By the end of this chapter, the reader should be able to
• Understand how the customer, competitor, and company
analysis (i.e., the 3 Cs) helps to develop a customer-driven
services marketing strategy.
• Know the key elements of a positioning strategy (i.e.,
segmentation, targeting, and positioning; STP), and explain why
these elements are so crucial for service firms to apply.
• Segment customers on needs first before using other common
bases to further identify and profile the segments.
• Distinguish between important and determinant attributes for
segmentation.
• Use different service levels for segmentation.
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Learning Objectives

• Target service customers using the four focus

strategies for competitive advantage.
• Position a service to distinguish it from its competitors.
• Understand how to use positioning maps to analyze
and develop competitive strategy.
• Know how to apply positioning to digital services and
platform business models.
• Develop an effective positioning strategy.

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Chapter Overview

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Customer-Driven Services Marketing
Strategy
• Managers need to think systematically about all
aspects of the service offering.
• This typically begins with an analysis of
– customers,
– competitors, and
– the company.
• This is collectively often referred to as the 3 Cs.

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Customer-Driven Services Marketing
Strategy
• This analysis helps a firm to determine the services
positioning strategy, which are
– segmentation,
– targeting, and
– positioning.
• This is frequently called STP by marketing experts.

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 Customer, Competitor, and Company
Analysis (3 Cs)
Customer Analysis:
1) Market Analysis
– Establish attractiveness of overall market and potential
segments within.
– Look at the overall size and growth of
• the market,
• the margins and profit potential, and
• the demand levels and trends affecting the market.
• Customer Needs Analysis:
– Who are the customers in that market in terms of
demographics and psychographics?
– What needs or problems do they have?
– What are the jobs-to-be-done from the customer’s perspective?
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Customer, Competitor, and Company
Analysis (3 Cs)
• Competitor Analysis:
– Identification and analysis of competitors.
– Analysis of competitors’ strengths and
weaknesses.
– Understanding opportunities for differentiation
and competitive advantage.

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Customer, Competitor, and Company
Analysis (3 Cs)
• Company Analysis:
– Identify the organization’s strengths in terms of
• its current brand positioning and image, and
• the resources the organization has.
– Examining the organization’s limitations or
constraints.
– Understand how an organization’s values shape
the way it does business.

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Segmentation, Targeting, and
Positioning (STP)
1. Segmentation:
– Dividing the population of possible customers into
groups.
– A market segment is composed of a group of
buyers who share
• common characteristics,
• needs,
• purchasing behavior, and/or
• consumption patterns.

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Segmentation, Targeting, and
Positioning (STP)
1. Segmentation:
– variables that can form the base of grouping are
• demographic,
• geographic,
• psychographic, and
• behavioral.

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Segmentation, Targeting, and
Positioning (STP)
2. Targeting:
– Understanding segment(s) that would most likely
be interested in the service, and focus on how to
serve them well.

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Segmentation, Targeting, and
Positioning (STP)
3. Positioning:
– The unique place that the firm and/or its service
offerings occupy in the minds of its consumers.
– Differentiation is the first step toward creating a
unique positioning for a service.

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Elements and Key Concepts of a
Services Positioning Strategy
Elements of a Positioning Strategy Key Concepts

Segmentation
• Segmenting service markets
• Service attributes and service
levels relevant for segmentation
― Important versus determinant
attributes
― Establishing service levels

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Elements and Key Concepts of a
Services Positioning Strategy
Elements of a Positioning Strategy Key Concepts

Targeting
• Targeting service markets through
four focus strategies:
― Fully focused
― Market focused
― Service focused
― Unfocused

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Elements and Key Concepts of a
Services Positioning Strategy
Elements of a Positioning Strategy Key Concepts

Positioning
• Positioning services in competitive
markets
• Using positioning maps to plot
competitive strategy
• Positioning digital services and
platforms
• Developing an effective positioning
strategy

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I. Segmenting Service Markets
• Segmentation is one of the most important concepts
in marketing.
• There are many ways to segment a market, and
marketing experts typically combine and integrate
several approaches.
Demographic segmentation

Psychographic segmentation

Behavioral segmentation

Needs-based segmentation
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I. Segmenting Service Markets

– Demographic segmentation
• Based on age, gender, and income
– Psychographic segmentation
• People’s lifestyles, attitudes, and aspirations
• Very useful in
– strengthening brand identity and
– creating an emotional connection with the brand.

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I. Segmenting Service Markets
– Behavioral segmentation
• Focuses on observable behaviors such as:
– people being nonusers,
– light users, or
– heavy users.

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I. Segmenting Service Markets
– Needs-based segmentation
• Focuses on what customers truly want in a
service and close to multi-attribute decision
models:
– the purpose and context of using the service,
the timing of use (time of day/week/season),
– whether the individual is using the service
alone or with a group, and
– if the latter, the composition of that group.

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Important Versus Determinant
Service Attributes
Important Attributes
Attributes that are important to the consumer but
may not be important for a buying decision. Such
attributes should not be used as a basis for
segmentation.

Determinant attributes
Attributes where customers see significant
differences between competing alternatives and
will determine the final purchase. Such attributes
are crucial for segmentation.

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II. Targeting Service Markets

Companies focus their efforts on those customers they

can serve best—the target segment.

Achieving Competitive Advantage Through Focus

In marketing terms, focus means providing a relatively
narrow product mix for a particular target segment.

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II. Targeting Service Markets
The extent of a company’s focus can be described along
two dimensions:
1. Market focus is the extent to which a firm serves
few or many markets.
2. Service focus describes the extent to which a firm
offers few or many services.

These two dimensions define the four basic focus

strategies.

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Basic Focus Strategies for Services

Figure 3.6 Basic focus strategies for services

Source: Adapted from Robert Johnson.

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Basic Focus Strategies for Services

Fully focused:
• Provides a limited range of services to a narrow and
specific market segment.
• There are key risks associated with pursuing the
fully focused strategy.
• The market may be too small to get the volume of
business needed for financial success, and the firm
is vulnerable should new alternative products or
technologies substitute their own.

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Basic Focus Strategies for Services

Market focused:
• Offers a wide range of services to a narrowly defined
target segment.
• Following a market-focused strategy looks attractive
because the firm can sell multiple services to a single
buyer.
• This strategy is potentially attractive in B2B markets
where sales efforts tend to be high.

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Basic Focus Strategies for Services

Unfocused:
• Serves broad markets and provide a wide range
of services.
• A few departmental stores followed this
strategy.

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Basic Focus Strategies for Services

Service focused:
• Offers a narrow range of services to a fairly broad
market.
• Require a broader sales effort and greater investment
in marketing communication particularly in B2B
markets.
• Lasik eye surgery clinics and Starbucks coffee shops
follow this strategy.

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How Should a Firm Select Which of
the Focused Strategies to Pursue?
• This decision relates back to the 3 Cs, segmentation,
and targeting analyses.
• A fully focused strategy may work well if a particular
segment has
– very specific needs and
– requires unique design of the service
environment, service processes, and interaction
with the firm’s frontline employees.
• A fully focused strategy can deliver superb quality
and at low costs because of its focus and experience.
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III. Principles of Positioning Services
• Positioning strategy:
– creating,
– communicating, and
– maintaining distinctive differences.
• These differences will be noticed and valued by the
firm’s target customers.
• Positioning Principles (Jack Trout):
—A company must establish a position in the minds of its
targeted customers.

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Principles of Positioning Services
—The position should be singular, providing one simple and
consistent message.

Figure 3.8 Visa has one simple message globally

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 Principles of Positioning Services
—The position must set a company apart from its
competitors.
—A company cannot be all things to all people—it
must focus its efforts.

Figure 3.9 For powerful positioning, a firm needs to set itself apart
from its competitors 33
Principles of Positioning Services
• The concept of positioning offers valuable insights by
– forcing service managers to analyze their firm’s existing
offerings
– and to provide specific answers to the following six
questions:
• What does our firm currently stand for in the minds of
current and potential customers?

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Using Positioning Maps to Plot
Competitive Strategy
• Positioning maps are tools to
– visualize competitive positioning along key aspects of its
services marketing strategy,
– map developments over time, and
– develop scenarios of potential competitor responses.
• A map usually has two attributes.
• Three-dimensional models can be used to show
three of these attributes.

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An Example of Applying Positioning
Maps to the Hotel Industry
• Managers of The Palace, a successful four-star hotel,
developed a positioning map.
• It shows their own and competing hotels to get a
better understanding of future threats to their
established market position in Belleville.
• Four key attributes were selected for study:
– room price,
– level of personal service,
– level of physical luxury, and
– location.
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An Example of Applying Positioning
Maps to the Hotel Industry

• Management collected
– their customer perceptions data and
– information on competing hotels from various sources.
• Scales were then created for each attribute
• Each hotel was rated on each of the attributes for the
positioning maps to be drawn.

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An Example of Applying Positioning
Maps to the Hotel Industry

Figure 3.11 Positioning map of Belleville’s principal business hotels: Service

level versus price level

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An Example of Applying Positioning
Maps to the Hotel Industry

Figure 3.12 Positioning map of Belleville’s principal business hotels: Location

versus physical luxury

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An Example of Applying Positioning
Maps to the Hotel Industry

Figure 3.13 Future positioning map of Belleville’s business hotels: Service level
versus price level

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An Example of Applying Positioning
Maps to the Hotel Industry

Figure 3.14 Future positioning map of Belleville’s business hotels: Location

versus physical luxury

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 Example

Positioning of Different Bar Soaps

“Product Space”
• Representing Consumers’
Perception for Different Brands
of Bar Soap
Example
Example
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Positioning Digital Services and
Platforms
Attributes of Digital Service Available for Positioning
includes:
• ease of use
• convenient sign-up
• intuitive customer
• price

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IV. Developing an Effective Positioning
Strategy
Basic elements to writing a good positioning statement:
• Target audience — the specific group(s) of people
that the brand wants to sell to and serve.
• Frame of reference — the category that the brand is
competing in.
• Point of difference — the most compelling benefit
offered by the brand that stands out from its
competition.
• Reason to believe — proof that the brand can deliver
the benefits that are promised.
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Developing an Effective Positioning
Strategy

Figure 3.18 LinkedIn positioned itself away from social networks by focusing
exclusively on professional networking and career development

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 Conclusion
• Most service businesses face intense competition.
• Marketers need to find ways of creating meaningful
value propositions.
• This is for their service offerings that stake a distinctive
and defensible position in the market against
competing alternatives.

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 Conclusion
• The nature of services introduces a number of
distinctive possibilities for
– competitive differentiation,
– going beyond price and product features to include
convenience and ease of use of apps,
– chatbots and online channels,
– location of physical facilities,
– scheduling,
– performance levels such as speed of service delivery, and
– the caliber of service personnel.

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Conclusion

• They target segments which they can serve better

than other providers.
• This is done by offering and promoting a higher level
of performance on those attributes particularly
valued by their target customers.

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Conclusion

• All successful service firms pursue a focus strategy.

• They identify the strategically important elements in
their service operations and concentrate their
resources on them.

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 APPLICATION EXERCISE
(Home work)
• Select a company of your choice. Identify the
variables that the company has used to
segment its markets. Support your answers
with examples from the company.
• Find examples of companies that illustrate the
four focus strategies discussed in this chapter.

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