We know that consumers go through the decision-making process for services (and goods) with various needs and from different cultural perspectives, and as marketers it is our role to fulfil those needs and cater to people’s differences to ensure they have a positive service experience. But people are so incredibly diverse – we place importance on different things, we have different priorities and interests, we’re in different life stages with different budgetary constraints. So, as marketers, how are we meant to tailor our offerings to satisfy all these different people? The short answer – we don’t. Through a process of identifying consumer segments and target markets, we find a subset of consumers with roughly similar needs and priorities, and we tailor our offerings with them in mind.
Welcome to Topic 3: Positioning Services in Competitive Markets. In this topic, you will learn about:
- The meaning of positioning strategy in a service context
- The four focus strategies to achieve competitive advantage
- Identifying and selecting target segments
- Distinguishing between important and determinant attributes
- Developing an effective positioning strategy using market, internal and competitor analysis
- How positioning maps help to analyse and respond to the dynamics of competitive positioning
In this topic we will consider how marketers narrow their vision and identify their ‘ideal customers’. They start by grouping potential customers in a particular market in terms of meaningful similarities (segmentation), and then identify the group(s) that are likely to respond the most positively to the organisation’s offering (target market selection). Then the task is for the service organisation to position themselves in the minds of their target market to stand out from competitors and be their preferred service offering.
These relate to the Subject Learning Outcomes:
- Discuss the key concepts, principles and unique challenges of services marketing in relation to the extended marketing mix.
Welcome to your pre-seminar learning tasks for this week. Please ensure you complete these prior to attending your scheduled seminar with your lecturer.
Click on each of the following headings to read more about what is required for each of your pre-seminar learning tasks.
Read Chapter 3 of the prescribed text - Lovelock et al. 2014, Marketing in the service economy, 6th edn., Pearson Australia.
Read the following article:
Wright , M n.d., The complete guide to STP marketing: Segmentation, targeting & positioning, Yieldify.
Read the two (2) case studies:
- 'Medical tourism in South-East Asia is positioned to attract foreign patients' on pp. 68-69 of the prescribed text.
- 'Example: Courier industry positioning maps' on pp. 89-90 of the prescribed text.
Read and watch the following content.
The importance of positioning strategy
We established that the service economy is a huge (and growing) sector globally. As more organisations enter the service economy, competition increases. Organisations try to battle it out for market share while facing the additional challenges for services, including the difficulties consumers have in differentiating and evaluating service attributes prior to purchase and consumption. In a competitive environment, there are more service offering alternatives, and likely more confusion of what option is best. To combat this, successful service organisations consider the unique advantage they could deliver to some customers against competitor offerings, and differentiate themselves on this basis. This process is called positioning and is defined as:
Choosing, creating and communicating distinctive differences that will be noticed and valued by those customers with whom the firm would most like to develop a long-term relationship(Lovelock et al. 2014, p. 70)
The key components here are distinctive difference (how are you notably different from competitors?) and relevance to customers (do customers notice and care about this distinctive difference - will it persuade them to choose your service over others?)
Competitive strategy and focus
It is practically impossible to be all things for all people. Brands that attempt to cater to everyone often end up delivering for no one, because they are not focused on fulfilling the needs of any one group. This is why focus is key to competitive strategy – by focusing your attention on a particular group of customers (with whom you believe you can deliver a superior service), you can understand their unique needs better and leverage upon your strengths to deliver the best service to them.
Jack of all Trades, Master of None!
Service organisations do vary in the extent of their focus, and the prescribed text describes four (4) focus strategies in detail (illustrated in the figure below);
Take a moment to think about some services you use – e.g. medical care, telecommunications, utilities, hotels, retailers. Try to identify some brands within your chosen service sector that would fit into each of these quadrants. Share your thoughts in the discussion forum.
Market Segmentation
While it is important to recognise that people are different and have unique needs and motivations, at some point, marketers need to group people based on their similarities. The task here is to group people in meaningful ways in order to communicate and deliver value to them effectively. These are called market segments.
A market segment is composed of a group of buyers who share common characteristics, needs and reasons to purchase, purchasing behaviour and consumption patterns(Lovelock et al. 2014, p. 73)
Read the article on market segmentation from the Investopedia website and watch the short video on segmentation embedded in the article.
An important consideration here is the relevance of these variables in deriving meaningful insights. Arguably in a lot of contexts, behavioural, psychographic and attitudinal variables provide much greater insights than something like demographics – being a particular gender or a particular age group does not necessarily determine your behaviour.
Target Market Selection
Once the various segments of a market have been identified, the service organisation must then narrow its focus to particular groups – target markets. Once a target market(s) has been selected, the organisation can devote its time and energy to understanding its target market and providing services specifically tailored to them. Target markets should be selected based on:
- viability – does this target market provide enough economic opportunity for the service organisation to be sustainable, and
- competitive advantage – can the organisation deliver an offering to this target market that is superior to their competitors.
Take a look at the Australian Government website for Business (2021) on how to identify your target market. To help new businesses succeed, a brief outline of the target market identification process and advice is provided.
It is important to note that target market selection does not occur at the exclusion of those outside it. Just because you have selected a particular target market does not mean that those outside that target market cannot or will not consume that service. This process is simply about considering the ‘ideal’ customer to communicate a clear message and deliver specific value that caters to them.
Positioning Strategy
Now that we have segmented the market and selected particular target markets, the final step is to develop a positioning strategy. This positioning strategy aims to set the service organisation apart from competitors by providing a clear message of what the brand is about. The text outlines four (4) important principles of a great positioning strategy:
(Lovelock et al. 2014, p.79)
- A company must establish a position in the minds of its targeted customers.
- The position should provide one simple and consistent message.
- The position must set a company apart from its competitors.
- A company cannot be all things to all people—it must focus its efforts.
A key point here is that positioning is about how you are perceived in the eyes of your target market. It is not just about how you see yourself. This requires a level of awareness beyond your own strategy and understanding that sometimes there are differences between how you see yourself and how your target market sees you (the task then is to work on aligning these two perspectives).
Starbucks entering Australia was a great example of misaligned positioning. The key elements of Starbucks’ positioning are about consistency in product and experience (you will have a consistent Starbucks coffee experience regardless of whether you walk into a store in New York, Melbourne, Hong Kong or Barcelona), and a premium offering (in terms of service experience and product quality). The problem with their positioning strategy when entering Australia was the latter; Australians did not perceive Starbucks in the same way that Starbucks perceived themselves. With a strong existing coffee culture that is dominated by many independent cafes rather than franchise chains, and different coffee tastes and preferences, Australians did not perceive Starbucks as a premium offering. However, Starbucks, in pursuing their positioning strategy as a premium product (and a consistent product), offered the same coffees at the same high prices in line with this premium positioning. Many Starbucks franchises in Australia failed as a result (Lovelock et al. 2014).
Effective positioning requires an in-depth understanding of your own service organisation, your competitors, and your target market. Once a positioning strategy has been established, all of the elements of your services marketing strategy need to align and reiterate this positioning strategy. Positioning must be constantly monitored and adjusted as competitors and consumers change.
The following figure demonstrates this process:
- Market attractiveness
- Market size and growth
- Profitability
- Market trends.
- Customer needs
- Under or unserved needs
- Most valued benefits.
- Current positioning
- Strengths
- Weaknesses.
- Current positioning and brand image
- Strengths
- Weaknesses
- Values.
- Needs-based segmentation
- Identify attributes and valued service levels.
- Determine customers that can be best served
- Identify and analyse possible differentiation
- Decide on focus strategy
- Select benefits to emphasise to customers
- Benefits must be meaningful to customers
- Benefits must not be well met by competitors.
- Positioning must address an attractive market
- Position must give a sustainable competitive advantage
- Positioning strategy
- 7 Ps of service marketing
- Customer relationship management strategy
- Service quality and productivity strategy.
Watch this short video to learn a little more about competitive analysis and how it relates to positioning strategy:
Perceptual Mapping
- Brand 1
- Brand 2
- Brand 3
- Brand 4
- Brand 5
Perceptual maps (also known as positioning maps) are clear, graphic representations of a service organisation’s positioning strategy (Lovelock et al. 2014). Key elements to a positioning map are:
- Using attributes that are relevant and important to the consumer as the map axes. The most common axes are price and quality (like the image above). Price and quality are great starting points because all markets can be evaluated on this basis. However, a great perceptual map demonstrates an organisation’s unique point of difference; in particularly competitive or saturated markets, many organisations are likely clustered together on a price-quality map. This provides limited value – the best insight you could take from such a map is ‘my organisation is seen as the same as competitor X and Y’. So, think about attributes that are relevant, important, and demonstrate the organisation’s unique point of difference.
- Correctly positioning your service organisation and competitors on the map according to these attributes, based on your target market’s perceptions (remember positioning is from the consumer viewpoint, not just how the organisation views themselves). Companies close to each other on a perceptual map are direct competitors, and those further away are more indirect competitors, who are likely targeting different segments in the market (a premium versus an economy market, for example).
- An additional step (sometimes omitted from perceptual maps) is to identify consumer segments (particularly your target market) on the perceptual map to reflect their preferences. This step is particularly helpful because it provides an additional layer of context and meaning to your map. If a service organisation overlaps with its target market on the perceptual map, it means the organisation’s offering satisfies its target market’s needs. If it is distanced apart, this could indicate an opportunity for the service organisation to
- change its offering to meet its target market’s needs better, or
- change how its target market perceives it.
Perceptual maps can also identify market opportunities – if you can identify a consumer segment with no companies that clearly cater to them, this could be an opportunity to reposition or introduce a new offering to cater to this group.
Knowledge check
Complete the following five (5) tasks. Click the arrows to navigate between the tasks.
Key takeouts
And that is it for Topic 3! Here are some key takeouts:
- While recognising that customers are diverse and unique, as marketers we need to be able to group customers together in meaningful ways, in order to communicate with them effectively and tailor our offering to their unique needs.
- Service organisations need to go through a process of identifying relevant consumer segments (from all possible customers in that market), and then narrowing their scope to focus on a particular target market(s) or ‘ideal customers’ who best align with the organisation’s offering.
- The service organisation then employs a positioning strategy to align with their target market – this is about identifying the organisation’s distinctive point of difference and articulating that to customers who recognise and see value in that point of difference.
- The key point to remember with positioning is to consider everything from the customer’s perspective, acknowledging that at times the customer may see an organisation differently to how the organisation sees itself. This difference in perception is an opportunity for the organisation to reposition, better articulate their point of difference or change their offering entirely.
Welcome to your seminar for this topic. Your lecturer will start a video stream during your scheduled class time. You can access your scheduled class by clicking on ‘Live Sessions’ found within your navigation bar and locating the relevant day/class or by clicking on the following link and then clicking 'Join' to enter the class.
Click here to access your seminar.
The following learning tasks will be completed during the seminar with your lecturer. Should you be unable to attend, you will be able to watch the recording, which can be found via the following link or by navigating to the class through ‘Live Sessions’ via your navigation bar.
Click here to access the recording. (Please note: this will be available shortly after the live session has ended.)
In-seminar learning tasks
The in-seminar learning tasks identified below will be completed during the scheduled seminar. Your lecturer will guide you through these tasks. Click on each of the following headings to read more about the requirements for each of your in-seminar learning tasks.
In a breakout room assigned by your lecturer, you will be given one (1) of the following questions to discuss. At the end of the discussion, you will share your responses with the class:
- Why is market segmentation and selective targeting particularly important to service organisations?
- Distinguish between importance and determinant attributes, and consider the role that each plays in defining the value offered by a service.
In a breakout room assigned by your lecturer, you will be given one (1) of the following case studies to discuss. At the end of the discussion, you will share your responses with the class:
- Medical tourism in South-East Asia is positioned to attract foreign patients (pp.68-69)
- Who is the target market for medical tourism in South-East Asia? Consider relevant segmentation variables and why this target market in particular was selected.
- Do you think target market perceptions are aligned with the medical practitioners’ positioning strategy? (i.e. do consumers view these medical practitioners in the same way that practitioners view themselves?). In what way might these perspectives be misaligned?
- Example: Courier industry positioning maps (pp. 89-90).
- The example includes two (2) different positioning maps. What are the key differences between the two (2) maps, and what important insight does it tell us about positioning strategy?
- The business graduates in the case study initially had the idea to employ ‘attractive young girls to work as the couriers’. From a competitive positioning perspective, what is the thought process behind this strategy, and why is it a good or bad idea?
In a breakout room assigned by your lecturer, you will be given one (1) of the following questions to discuss. At the end of the discussion, you will share your responses with the class:
Select a service organisation of your choice and carry out each of the following tasks:
- Define and profile its (one) main market.
- Identify what you believe to be the determinant attributes for this target market.
- Summarise the nature of its positioning strategy in relation to this target market.
- Define the value offered to the target market.
Welcome to your post-seminar learning tasks for this week. Please ensure you complete these after attending your scheduled seminar with your lecturer. Your lecturer will advise you if any of these are to be completed during your consultation session. Click on each of the following headings to read more about the requirements for each of your post-seminar learning tasks.
In your reflective journal, prepare a list of key terms and concepts from this topic that will be useful for your audit report. Find supporting references relevant to your chosen company in relation to these concepts.
You can access the reflective journal by clicking on ‘Journal’ in the navigation bar for this subject.
Consider Question 1 of the case study, Banyan Tree: Branding the intangible (Lovelock et al., 2014, pp. 444-449). Start to structure your response in dot points and search for supporting references.
Identify the target market of your chosen service organisation. Brainstorm segmentation, target market and positioning considerations, and search for supporting evidence.
Each week you will have a consultation session, which will be facilitated by your lecturer. You can join in and work with your peers on activities relating to this subject. These session times and activities will be communicated to you by your lecturer each week. Your lecturer will start a video stream during your scheduled class time. You can access your scheduled class by clicking on ‘Live Sessions’ found within your navigation bar and locating the relevant day/class or by clicking on the following link and then clicking 'Join' to enter the class.
Click here to access your consultation session.
Should you be unable to attend, you will be able to watch the recording, which can be found via the following link or by navigating to the class through ‘Live Sessions’ via your navigation bar.
Click here to access the recording. (Please note: this will be available shortly after the live session has ended.)
For those who want to go the extra mile, here are some additional useful resources:
- Benedikt, J & Kunz, W 2012, ‘How to transform consumers into fans of your brand’, Journal of Service Management, 23(3):344-61.
- Blankson, C & Kalafatis, S 2007, ‘Positioning strategies of international and multicultural-oriented service brands’, Journal of Services Marketing, 21(6):435-50.
- Falardeau, E, Glynn, J & Ostromecka, O 2021, Sweating for the fitness consumer, McKinsey.
- Grossman, J 2019, Deep Segmentation Strategies To Improve The Customer Experience, Forbes.
- Keller, KL, Sternthal, B & Tybout, A 2002. ‘Three questions you need to ask about your brand’, Harvard Business Review, 80(9):80-89.
References
- Australian Government 2021, Identify your target market, https://business.gov.au/marketing/identify-your-target-market
- Campaign Creators 2017, How to conduct a competitive analysis | part 1, streaming video, YouTube, https://youtu.be/5R_vYnQBfm4
- Houraghan, S 2020, How to Make a Perceptual Map, streaming video, YouTube, https://www.youtube.com/watch?v=X8cD7y4pJFs
- Johnston, R 1996, ‘Achieving focus in service organisations’, Service Industries Journal, 16(1):10-20.
- Lovelock, C, Patterson, P & Wirtz, J 2014, Services marketing, 6th edn., Pearson Australia.
- Tarver, E 2021 'Market segmentation', Investopedia, https://www.investopedia.com/terms/m/marketsegmentation.asp
- Wright, M n.d., The complete guide to STP marketing: Segmentation, targeting & positioning, https://www.yieldify.com/blog/stp-marketing-model/
