Q: How can the decision about whom to target provide a service organization with a competitive advantage?
A: Competitive advantage can be grounded in, and gained because of the customers that a service organization chooses to target the market because of the opportunities;
- to define, profile, attract and appeal to customers either not served or not satisfied by competitors;
- to select and concentrate on customers likely to yield a higher than normal return;
- to get to know and cater for the needs and wants of targeted customers in such a way that encourages loyal patronage and raises the customer’s perceived switching costs; and
- to customize what is offered, as well as where and how, in a highly focused and specialized way that is valued by customers.
Furthermore, competitive advantage can also be gained because of the decision relating to the location, accessibility and convenience of the service vis-à-vis the location and proximity of customers targeted.
Q: Distinguish between importance and determinacies in consumer behavior.
A: Determinant attributes are those that influence the decision to patronize one service provider as opposed to another competing one, regardless of the perceived absolute importance of any single attribute.
For example: operational cleanliness and hygiene is likely to be regarded by most, if not all, people as an important consideration as far as hospitals are concerned. Yet when the decision must be made about which hospital to go to, determinant attributes may well include other considerations like;
- Geographical proximity
- Convenience (accessibility)
- Room size
- Availability of resources
- Recommendation of one’s own doctor
- And the likely cost to the patient
The implication for service providers is that both sets of attributes must be discerned. Importance attributes serve to define the expectations of customers and the basic terms of competition; determinant attributes define individual decision-making and purchasing criteria.
Q: Discuss the difference between customer perceptions and expectations, and how one affects the other.
A: Perceptions are the views that a customer holds about a service organization, its offerings and personnel because of direct experience, word-of-mouth, observation and inference. Or other stimuli such as advertising, publicity and the expressed attitudes and behavior of reference groups.
Because of selection, attribution and individual learning they may not necessarily be accurate but, for the person who holds them, perceptions represent their interpretive viewpoint and beliefs. Consequently, perceptions influence the pre-purchase expectations of customers.
These same expectations are subsequently confirmed or disconfirmed in the light of the actual service performance and experience, and how this is perceived.
Q: What should a service provider aim to achieve through positioning?
A: Positioning is the process of establishing and maintaining a distinctive place in a market for an organization and its individual service product offerings in relation to its competitors, and with reference to the characteristics, needs and wants of its intended target markets.
Thus, a service provider should aim to achieve at least three things through positioning:
- Firstly, a place of distinctive competitive advantage where they can stand apart;
- Secondly, the identification of service product attributes that are both important to, and determinant of, consumer choice and purchasing behavior;
- Thirdly, a market perception that what they have to offer is not only different but competitively appealing and attractive.
In this way a service provider can work out how best to configure, communicate and deliver the service product offering in such a manner that is most meaningful, attractive and appealing to the target market, and that is also competitively distinctive and advantageous.
Q: Are there any limits to the number of market segments that a service provider can create and target? What are these?
A: Generally speaking, the limitations on how many market segments a service provider can create, and target lie in the astuteness and creativity of individual marketers, and the resource capacity and capabilities of individual firms.
Also, target segments should ultimately be selected based on their sales and profit potential, and with reference to the firm’s ability to match or exceed competing offerings directed at the same segment.
Target markets must be
- of enough size and substance to be viable
- determined to have a need for, and likely to be responsive to the service product offering