Positioning Strategies for Service Providers

The following article is concerned with the importance of positioning strategies to a service provider and the associated steps in selecting and supporting such a strategy through the effective management of marketing resources and the development of a competitive advantage through superior quality management. The article is structured into two major sections dealing with a) the selection and b) the support of a firm’s positional strategy.

Positioning – A Definition

Positioning is the process of identifying a service provider’s various customer publics and targeting these publics with an appropriate mix of positioning strategies. It involves the creation of an image in the consumer’s mind of the service provider and the services offered by the provider, thus adding tangible features to the intangible service in the form of individual perceptual qualities.

Positioning gives a service provider the opportunity for differentiation which, particularly in the service industry, is a key element for the development of a competitive advantage over other providers. Quality considerations to support a firm’s positioning, once it has been established, are of considerable importance, as any chosen positioning strategy will give rise to customer expectations, which should at the very least be met, if not exceeded.

Selection of a Positioning Strategy

In the following section we will have a look at the steps involved in developing a positioning strategy for a service and the associated quality considerations. There are three major steps in the development of a positioning strategy:

i.Segmenting

ii.Targeting

iii.Positioning

Segmenting

Market segmentation is the process of breaking up the market into smaller, more homogeneous groups in order to facilitate a more direct marketing within these groups. Segmentation has become increasingly important in the last two decades, with the market place becoming more diverse and an increasing number of heterogeneous groups emerging. In order to not waste valuable resources firms now have to be aware of who their customers are and how these customers’ needs and wants can best and most efficiently be satisfied.

Segmentation is arguably the most important step in the positioning process, as the accurate segmentation of the market place will provide the firm with a blueprint of their customers, while an improperly carried out segmentation can result in

i.Under-Positioning

ii.Over-Positioning

iii.Confused Positioning

iv.Doubtful Positioning

Segmentation variables are numerous, but can generally be summarised into four major categories:

i.Demographic

ii.Geographic

iii.Psycho-graphic

iv.Buyer-Behaviour

Segmentation enables the firm to chose whether to concentrate on one particular customer group, or to serve several market segments simultaneously. This depends very much on the firm’s ability to differentiate its services in order to satisfy the differing needs in the various segments.

Targeting

Targeting is the process of deciding on one or more of the market segments identified in the segmentation. In order to successfully target a segment, the firm has to be aware of its own strengths and weaknesses, those of the competition and the characteristics of the target segment. A measure will be applied to all identified segments in order to find those most attractive and feasible to the service provider. In doing so, the firm has to bear in mind certain criteria. These are generally the growth and profit potential of the segment in question, its size and the competitive situation. Furthermore, segments can be described in terms of:

i.Measurability

ii.Accessibility

iii.Substantiality

iv.Actionability

When these measures are applied to the various segments, the firm will be able to identify those segments that offer the best competitive position, opportunity for expansion and diversification and that can be best served by the firm. Through targeting, the firm can offer a more homogeneous group of customers a specifically designed service, thus increasing customer satisfaction and ultimately repeat custom and positive word of mouth.

Positioning

The process of positioning is crucial in the creation of an image in consumer minds. It does not need to be innovative, but rather exploit what is already in existence. Positioning is of particular use in a society of over-communication, intense competition and media explosion.

When considering positioning strategies, the model by Parasuraman, Zeithaml and Berry (1988) of the perceived dimensions of service quality coupled with the technique of perceptual mapping can be helpful. The model identifies five determining dimensions in terms of service quality, which is in turn the determining factor in the customer’s evaluation of a service.

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These dimensions have to be borne in mind both in the selection and support of a service provider’s positioning. However, since a firm’s environment is not solely internal, the competition already existing within the target segment needs to be evaluated as well. In order to create a differential advantage, the service should then be positioned in an alternative market gap to those already occupied by the competition. A helpful tool to accomplish this is the technique of perceptual mapping.

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In perceptual mapping, two or more relevant dimensions of the firm’s service offering are evaluated in terms of their coverage by the firm. The above example shows the successful re-positioning of ‘Lucozade’ from a convalescent drink given to old people in hospitals as a recovery aid to the energy glucose drink of choice of the 15 to 24 year-old market in Ireland and the U.K.

Perceptual mapping can be used to show the positioning of all the major players within a market place. In terms of price and quality in the automobile market, for example, Mercedes and Daewoo would be graphically very distant from one another, showing the companies’ differing positioning strategies.

An important aspect of positioning is marketing communications. Once a firm has identified and decided on a target segment and positioned its service accordingly, it needs to convey this image to the target customer. It is of vital importance that this communication is in complete accordance with the service’s actual positioning to avoid confused positioning and thus a confused customer.

When all these steps have been undertaken, the firm has to make sure that the service quality dimensions are not only kept at the status quo, but also improved upon in accordance with the service’s positioning. This has to be done through the effective management of the firm’s marketing resources.

Supporting the Positioning of a Service

A service’s positioning depends on a number of variables, which are covered by a firm’s marketing resources in the form of the extended marketing mix for service providers. It is important for a firm to realise that the entire marketing mix is involved in the selection and support of the service’s positioning. Many financial institutions have in the recent past made the mistake of trying to change their image by simply replacing logos and names, but failing to consider the impact of these changes on their competitive position. To position, re-position or maintain a position in the market place, all elements of the marketing mix need to be employed.

Service

As mentioned above, a consistent quality management is crucial in maintaining a service’s positioning. The dimensions of reliability, empathy, responsiveness, assurance and tangibles need to be delivered at a continuous quality level to establish the service’s positioning in the customer’s mind.

Price

Price has a large impact on customers’ perception of a service. Price needs to be set in accordance with competition, internal considerations and the customer’s perception of the service value. Adjustments in both directions need to be backed by the other marketing mix elements.

Place

Differentiation through availability of the service has become increasingly important especially in the financial market. Banks now use ATM’s and Internet and phone banking to reduce the perishability element of their services. The accessability of a service is of great importance especially in the health care sector and the grey market.

Promotion

Promotion is the element that communicates the service’s positioning to the consumer and thus bound together with the positioning process. If promotion fails to convey the appropriate image of the service, confused or doubtful positioning will result, making it difficult for customers to determine whether or not the service is appropriate for their needs.

People

Especially in the service quality dimensions identified by Parasuraman, Zeithaml and Berry, people play a determining role in maintaining positioning, as they are in many cases the only tangible element visible to the customer. It is therefore very important for employees to understand the service’s positioning in order to carry out their duties accordingly. A good example for this is the Hertz slogan ‘We try harder.’ This company policy has to be reflected in employees’ behaviour.

Process

Process is the element in the marketing mix that underpins the firm’s positioning during the transaction. As with people, the process has to be in line with the positioning, as discrepancies will result in post-purchase dissonance.

Physical Evidence

Physical evidence is part of the process and also a tangible representation of the firm’s positioning. A service provider positioned as a premium rate bank has to make sure this positioning is evident in the firm’s facilities.

Conclusion

In conclusion, we can say that in order to successfully position a service and maintain that position, a firm needs to gather all available internal and external information and employ all available resources within the company. If the service’s positioning is to be accepted by the consumer, the firm has to honour its promises to the customer the first time around. A good example of the negative impact of promises not kept could be seen recently in the case of Ryanair’s one millionth customer, a news story that has resulted in considerably negative public relations for the airline.