Setting Prices and Implementing Revenue

7/31/2019 Setting Prices and Implementing Revenue

1/6

Chapter 17 Notes

Focus Underlies the Search for Competitive AdvantageIntensifying competition makes it important to differentiate productsIn mature market, only way to grow may be to take a share fromcompetitorsMust be selective in targeting customersRather than compete in an entire market, rm must focus efforts oncustomers it can serve bestEmphasize competitive advantage on those attributes that will bevalued by customers in target segments

Standing Apart from the CompetitionA business must set itself apart from its competition

To be successful it must identify and promote itself as the bestprovider of attributes that are important to target customers

Basic Focus Strategies for Services

Risks and Opportunities of a Fully Focused StrategyOpportunities

Developing recognized expertise in a well-dened niche mayprovide protection against would-be competitorsAllows rms to charge premium prices

RisksMarket may be too small to generate needed volume ofbusinessDemand for a service may be displaced by generic competitionfrom alternative productsPurchasers in chosen segment may be susceptible to economicdownturn

Rests upon good market segmentationDeveloping the Right Service Concept for a Specic Segment


2/6

Use research to identify and prioritize which attributes of a givenservice are important to specic market segmentsIndividuals may set different priorities according to:

Purpose of using the serviceWho makes the decisionTiming of useWhether service is used alone or with a groupComposition of that group

Importance of Determinant AttributesConsumers choose between alternative service offerings based onperceived differences between themAttributes that distinguish competing services from one another arenot necessarily the most important onesDeterminant attributes determine buyers' choices betweencompeting alternatives

Service characteristics that are important to purchasers

Customers see signicant differences between competingalternatives on these attributes

Establishing Service Levels and TiersNeed to make decisions on service levels - level of performancerm plans to offer on each attributeSegment customers according to willingness to trade off price vs.service levelService tiering - positioning strategy based on offering severalprice-based classes of service concept

E.g. Industry = Car rentalTiers = Class of vehicleKey Service Attributes and Physical Elements Used in Tiering =vehicle size, degree of luxury, special vehicle type (van, SUV,convertible)

Four Principles of Positioning StrategyMust establish position for rm or product in minds of customersPosition should be distinctive, providing one simple and consistent

messagePosition must set rm/product apart from competitorsA company cannot be all things to all people - must focus its efforts

Principles of PositioningWhat does our rm currently stand for in the minds of current andprospective customers?What customers do we serve now, and which ones would we like totarget in the future?

What is value proposition and target segment for each of our


3/6

service offerings?How do our service offerings differ from competitor's?What changes must we make to our offerings to strengthen ourcompetitive position?Avoid trap of investing too heavily in points of differences that areeasily copied

Product Positioning vs. Copy PositioningPositioning often associated with communication mix, notablyadvertising, promotion, and public relationsCopy positioning - use of advertising to create images andassociations for broadly similar branded products to sharpendistinctions in customer's mind

Toilet paper commercialsGrowing number of rms engage in co-brandingPositioning guides rm to marketing strategy development

Positioning as a Diagnostic Tool

Positioning links market analysis and competitive analysis tointernal corporate analysisUnderstand relationships between products and markets

Compare to competition on specic attributesEvaluate product's ability to meet consumer needs/expectationsPredict demand at specic prices/performance levels

Identify market opportunitiesIntroduce new products

Redesign existing productsEliminate non-performing productsMake marketing mix decisions, respond to competition

Distribution/service deliveryPricingCommunication

Role of Positioning in Marketing StrategyPositioning strategy can take place at different levels

Multi-site, multi-product business: Position may be establishedfor entire organization, given service outlet, or specic serviceoutlet

Help prospective customers get mental "x" on what to expectFailure to select desired position in marketplace and develop amarketing action plan to hold this position may result in:

Head-on competition from a stronger competitorBeing pushed into a position that nobody else wantsOrganization's position being so blurred that nobody knows what


4/6

its distinctive competence really isDeveloping a Market Positioning Strategy

Anticipating Competitive ResponseCompetitors might pursue same market positionGet inside competitors' heads - conduct internal corporate analysisfor all current/potential challengers to get sense of how they mightactAnalyze possible effects of alternative competitive moves

Impact of price cut on demand, market share, and protsResponses of different segments to changes in serviceattributes

Using Positioning Maps to Plot Competitive StrategyUseful way to represent consumer perceptions of alternativeproducts in visual formatTypically conned to two attributes, but 3D models can be used toportray positions on three attributes simultaneously

Information about a product can be obtained from market data,derived from ratings by representative consumers, or bothIf consumer perceptions of service characteristics differ sharplyfrom "reality" as dened by management, then marketing effortsmay be needed to change these perceptionsAlso known as perceptual maps

Positioning of Hotels: Price vs. Service Level

Positioning of Hotels: Location vs. Physical Luxury


5/6

Positioning of Hotels after Construction: Price vs. Service Level

Positioning of Hotels after Construction: Location vs. PhysicalLuxury

Positioning Maps Help Managers to Visualize StrategiesPositioning maps display relative performance of competing rmson key attributesResearch provides inputs to development of positioning maps -challenge is to ensure that...

Attributes employed in maps are important to target segmentsPerformance of individual rms on each attribute accuratelyreects perceptions of customers in target segments

Predictions can be made of how positions may change in light offuture developmentsSimple graphic representations are often easier for managers to

grasp than tables of data or paragraphs of prose


6/6

Charts and maps can facilitate "visual awakening" to threats andopportunities, suggest alternative strategic directions

RepositioningPositions evolve in response to changing market structures,technology, competitive activity, and the nature of rm itselfFirm may have to make signicant change in existing position

Revising service characteristics, redening target marketsegments, abandoning certain products, withdrawing from

certain market segmentsImproving negative brand perceptions may require extensiveredesign of core product

Weaknesses may be perceptual rather than realE.g. Long Island Trust

Repositioning introduces new dimensions into positioning equationthat other rms cannot immediately match

Summary

Focus strategies help companies be more competitiveThe four different focus strategies for services are:

FocusedUnfocusedFully focusedMarket focused

It is important to know how customers make choices betweencompetitive service offerings and equally important to know theirdeterminant attributes, that actually determine the buyer's choiceCompetitive positioning establishes a position in the minds ofcustomers, with a simple consistent message, setting it apart fromthe competitors in a way that focuses its effortsPositioning maps are powerful visual representations of competitivepositioning

Documents

Setting Prices and Implementing Revenue