Marketing Strategy and Competitive Positioning pdf ebook

Figure 13.2 
Goods and 
services
Mainly
product
Mainly
service
Tangible
Intangible
Packaged
goods
Motor
cars
Fast
food
Airlines
Medical
services
Goods and
services
spectrum
Tangibility

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CHAPTER 13 COMPETING THROUGH SUPERIOR SERVICE AND CUSTOMER RELATIONSHIPS
services process is determined by the way the patient responds to, and interacts with, the 
services provided.
It is also worth bearing in mind that the services sector now accounts for some three-
quarters of the gross domestic product of the EU countries and over three-quarters of EU 
jobs (see http://ec.europa.eu/trade/creating-opportunities/economic-sectors/services/, 
accessed 2019). Services are growing quickly in the world economy, making up almost 64 
per cent of gross world product, suggesting huge potential in emerging markets (see The 
World Factbook, https://www.cia.gov/library/publications/the-world-factbook/geos/
xx.html).
Between these two extremes lie offers that combine tangible and intangible elements in 
more equal proportions. In fast-food outlets, for example, the offer is a combination of the 
physical food (tangible) together with the ambience of the restaurant and the speed of the 
service provided (intangibles).
As more companies have embraced quality control and assurance techniques in the pro-
duction of their physical products, so the scope for differentiation between one supplier 
and another on the tangible elements of offer has diminished. Total quality management 
has been increasingly applied to the physical element of products, reducing variability, 
tightening tolerances and ensuring fewer defects (or even approaching the cherished goal 
of zero). Increasingly, companies operating at the left-hand end of the spectrum are look-
ing to enhance differentiation through focusing on the intangible elements of the offer. 
These efforts include branding the offer and the delivery of service to augment the physical 
product offer. At the right-hand end of the spectrum, companies and other service providers 
are recognising that the type and quality of the service they offer is their major means of 
differentiation. The line between tangible and intangible elements is becoming blurred and 
moving downwards, so that the intangible elements such as service are becoming increas-
ingly important across the whole spectrum.
For example, Vargo and Lusch (2004) have pioneered a ‘service-dominant logic’ (SDL) 
that has attracted huge attention globally. SDL proposes that organisations, markets and 
society are fundamentally concerned with exchange of service – the applications of compe-
tences (knowledge and skills) for the benefit of another party. That is, ‘service is exchanged 
for service’, such that all firms are service firms; all markets are centred on the exchange of 
service and all economies and societies are service based. Consequently, marketing thought 
and practice should be grounded in service logic, principles and theories. SDL embraces 
concepts of the ‘value-in-use’ and ‘co-creation of value’ rather than the ‘value-in-exchange’ 
and ‘embedded-value’ concepts. Instead of firms being informed how to market to custom-
ers, they are urged to market with customers, as well as other value-creation partners in the 
firm’s value network. Traditional assumptions about differences between marketing goods 
and services are severely challenged by SDL. The fuller implications of SDL continue to 
unfold (for example, see http://www.sdlogic.net/ for updates and further insights). That 
said, a simple analogy may serve to clarify the basic idea: specifically, it is often said that 
when a customer goes to a hardware store to buy a drill, they are not actually buying the 
drill, but rather they are purchasing holes. It’s a simplification of course (and there are many 
other physical and psychological aspects to the choice of brand at least), but it does express 
something reasonably profound about the difference between value in use (the hole) and 
embedded value (the physical drill).
The practical implications of choices on product and service mix are considerable. In 
industrial product manufacturing, increasingly the highest added-value lies in technically 
complex products. Advanced manufacturing processes produce items that require consid-
erable engineering or scientific skills, or special marketing capabilities. Shifting towards 
advanced manufacturing offers a way of developing strong positions in niche markets glob-
ally, although the investment required may be considerable (Marsh, 2009).
For example, aero-engine manufacturer Rolls Royce’s strategy has been to expand after-
sales service, instead of relying on sales of new engines, selling airlines outsourcing packages 

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SERVICE AND COMPETITIVE POSITIONING
in which it takes responsibility for maintaining its engines. As new generations of complex 
‘low-carbon’ engines become available, it is likely the outsourcing business will expand 
further – currently around half Rolls-Royce’s income is from servicing engines ( O’Connell, 
2009 ). In this sense, Rolls-Royce claims it does not sell engines any more, it sells thrust. Of 
course, every good idea generates competition, and in more recent years other manufactur-
ers have caught up with Rolls Royce. For example, General Electric’s equivalent offering is 
sold as ‘power by the hour’ – a phrase that really sums up the concept well.
13.2 
Service and competitive positioning 
A critical starting point in building a strategy is the issue of what level of service provi-
sion is to be offered and how this defines a company’s positioning in the market or market 
segment in question. Of course, into this choice must also be factored the capabilities 
of the company to deliver the service level being offered, but a first question is how we 
want to be perceived in terms of service level and quality compared to the alternatives 
in this market. 
In many modern markets the base-level requirement for service is higher than ever 
before. Without meeting this minimum level of service provision, it is unlikely we can be a 
significant player in this market – this is the cost of being in this business. But importantly, 
beyond this point significant choices exist. It is competitively risky and very expensive to 
assume that all service is good service, so the more we provide the better, forever. In fact, 
important strategic choices should be addressed by executives in this regard. 
Figure 13.3 suggests some important positioning choices as they relate to service 
provision. The attractions of a high service strategy are in enhancing customer retention 
and satisfaction through hard-to-imitate added-value in the form of intangibles. Much 
conventional wisdom supports this as an attractive option. However, it is important to 
recognise that there are choices. In many situations, a low service strategy may be an 
effective alternative that defines a distinct space in the market and delivers high cus-
tomer value through lower prices or other factors. In many ways, it is easy to come to the 
conclusion that this line of thinking is diametrically opposed to the ‘service-dominant 
logic’ concepts discussed earlier. However, this is not entirely correct. Specifically, one 
could think about such ideas as trying to focus on the ‘core’ service the consumer is 
interested in getting when they purchase, rather than the extraneous add-ons that have