Chapter 7

Positioning Services in Competitive Markets

GENERAL CONTENT

Multiple Choice Questions

1. In marketing terms, ____________ means providing a relatively narrow product mix

for a particular market segment.
a. cantor
b. synopsis
c. focus
d. phyla
e. class
(c; Easy; p. 186)

2. Which of the following is NOT one of the four basic focus strategies?
a. Service focused
b. Unfocused
c. Fully focused
d. Refocused
e. Market focused
(d; Easy; p. 186)

3. A ____________ is composed of a group of buyers who share common characteristics,

needs, purchasing behavior, or consumption patterns.
a. target class
b. class
c. focal segment
d. market segment
e. target segment
(d; Moderate; p. 187)

4. A(n) ____________ is one that a firm has selected from among those in the broader
market and may be defined on the basis of several variables.
a. general segment
b. segmentation field
c. target segment
d. holistic segment
e. mass customization
(c; Easy; p. 187)

50
5. The same individuals may set different priorities for attributes according to all
EXCEPT which of the following?
a. The purpose of using the service.
b. Who makes the decision.
c. The timing of use.
d. Whether the individual is using the service alone or with a group.
e. The cost of the service.
(e; Moderate; p. 188)

6. Which of the following is the best example of a determinant characteristic for airline
travel?
a. Oxygen masks
b. Plane size
c. Quality of food and drinks
d. Having cocktail service
e. Floatation devices
(c; Easy; p. 189)

7. ____________, refers to an explicit form of positioning strategy that is based upon

offering several price-based classes of service concept, each based on packaging a
distinct level of service performance across many attributes.
a. Service tiering
b. Service conscription
c. Broad-basing
d. Price-setting
e. Matching
(a; Moderate; p. 190)

8. Which of the following is NOT one of the four principles of positioning according to
Jack Trout?
a. A company must maintain a strong labor base.
b. A company must establish a position in the minds of its targeted customers.
c. The position should be singular, providing one simple and consistent message.
d. The position must set a company apart from its competitors.
e. A company cannot be all things to all people—it must focus its efforts.
(a; Moderate; p. 191)

51
9. Failure to select a desired position in the marketplace—and to develop a marketing
action plan designed to achieve and hold this position—may result in which of the
following possible outcomes?
a. The organization (product) is pushed into a position, where it faces indirect
competition from a weaker competitor.
b. The organization (product) is pushed into a position that nobody else wants,
because there is little customer demand.
c. The organization’s (product’s) position is so blurred that nobody knows what its
supplementary aspects really are.
d. The organization (product) becomes obsolete before demand can be built.
e. The organization (product) cannot sustain growth in lieu of external resources.
(b; Moderate; p. 195)

10. Market analysis addresses all of the following factors EXCEPT ____________.
a. overall level of demand
b. trend of demand
c. government regulations
d. geographic location of demand
e. market analysis addresses all of the above factors
(c; Easy; p. 196)

True/False

11. Market niches that seem too narrow to offer sufficient sales in one country are
indicative of globally narrow market niches.
(False; Moderate; p. 185)

12. It’s usually a good idea for firms to try to appeal to all potential buyers in a market,
because customer variety leads to full capacity.
(False; Moderate; p. 185)

13. A fully-focused organization concentrates on a narrow market segment, but has a

wide range of services.
(False; Moderate; p. 186)

14. A service-focused firm offers a narrow range of services to a fairly broad market.
(True; Moderate; p. 186)

15. One of the reasons why firms with a narrow product line elect to serve multiple
segments is to create a portfolio of customers that hedge against low demand risks.
(True; Moderate; p. 186)

16. A target segment should only be selected on the basis of their sales and profit
potential.
(False; Moderate; p. 187)

52
17. No service attribute can be easily quantified because of the intangibility of services.
(False; Moderate; p. 190)

18. Positioning plays a pivotal role in marketing strategy, because it links market
analysis and competitive analysis to environmental analysis.
(False; Challenging; p. 195)

19. The objective of corporate analysis is to identify the organization’s resources, any
limitations or constraints, its goals, and how it values shape the way it does business.
(True; Moderate; p. 196)

20. The best way to anticipate possible competitive responses is to identify all current or
potential competitors and to put oneself in their own management’s shoes by
conducting an internal corporate analysis for each of these competitors.
(True; Moderate; p. 197)

Short Answer

21. What are the two dimensions along which a company’s focus can be described?

Market and service.

(Easy; p. 186)

22. What are the characteristics of an unfocused service category?

Serving broad markets and providing a wide range of services.

(Moderate; p. 186)

23. Distinguish between important and determinant attributes

Important attributes represent what customer’s value in a service, whereas

determinant attributes are those that actually determine buyers’ choices between
competing alternatives.
(Moderate; p. 189)

24. Describe copy positioning.

Copy positioning refers to the widespread use of advertising in packaged goods

marketing to create images and associations for broadly similar branded products so
as to give them a special distinction in customer’s mind.
(Moderate; p. 192)

53
25. What are the three types of analysis to consider when developing a market
positioning strategy?

Market analysis, internal analysis, and competitor analysis.

(Moderate; p. 197)

Essay

26. Explain what a fully-focused and a market-focused strategy are and discuss the
opportunities and risks inherent in selecting each strategy.

A fully-focused organization provides a limited range of services to a narrow and

specific market segment. Opportunities in this strategy include developing
recognized expertise that retains a competitive advantage over other firms. A risk is
that the market may be too small to generate the volume of business necessary.

A market-focused organization concentrates on a narrow segment with a wide range

of services. This strategy offers the opportunity to sell multiple services to a single
customer that enhances the value of promotional efforts. Managers need to ensure
that the firm has the ability to excel at many different tasks and understand what
services go together per customer purchasing practices and preferences.
(Challenging; p. 186)

27. Discuss how tiering is established in the hotel industry.

The tiers in the hotel industry are created by external rating agencies like Mobile
Guide, Yahoo, and AAA. The tiers are expressed by stars or diamonds with more
representing better quality. Hotels and motels are inspected periodically against
multiple criteria. New hotels are designed with a specific tier in mind, but are subject
to the external evaluation. Existing lodging facilities may be upgraded or
downgraded, based on what the inspectors perceive.
(Moderate; p. 190)

APPLICATION CONTENT

Multiple Choice Questions

28. Segmentation variables at Royal Bank of Canada include all of the following
EXCEPT ____________.
a. credit risk profile
b. current and projected profitability
c. life stage
d. mortgage status
e. likelihood of leaving the bank
(d; Challenging; p. 188)

54
29. The strategy employed by Royal Bank of Canada can be best described as
____________.
a. macro-segmentation
b. micro-segmentation
c. market-segmentation
d. medium customization
e. market customization
(b; Moderate; p. 188)

30. Bright Horizons strategy included which of the following?

a. Marketing services to employers instead of parents.
b. Hiring inexpensive labor.
c. Commoditized service offerings.
d. Heavy regulatory oversight.
e. All of the above are strategies employed by BH.
(a; Moderate; p. 192)

31. Grant Thornton, the fifth largest firm in the accounting industry, has successfully
positioned itself as offering ____________ and having ____________.
a.high investment yield; “a passion for the business of accounting”
b.limited financial obligation; “a desire to exceed expectations”
c.easy access to partners; “a passion for the business of accounting”
d.low employee turnover; “a desire to exceed expectations”
e.high asset turnover; “a passion for the business of accounting”
(c; Challenging; p. 193)

32. Which of the following is NOT a firm specific benefit advertised by the associated
firm?
a.Verizon—“We never stop working for you.”
b.FedEx Ground—“Relax, It’s FedEx.”
c.T. Rowe Price—“Better than the rest.”
d.Land’s End—“Shopping online beats standing in line.”
e.Prudential Financial—“Growing and protecting your wealth.”
(c; Moderate; p. 194)

True/False

33. Toronto-based Royal Bank of Canada uses data modeling at least once a month to
segment its base of 10 million customers.
(True; Easy; p. 188)

34. Royal Bank of Canada has found that customers who hold packages of several
services are more profitable than those who don’t.
(True; Easy; p. 188)

55
35. Firms like British Airways, Singapore Airlines, and Virgin Atlantic are continually
seeking service features that will create competitive advantage. Each offers fold-
down business class seats, while many other firms do not.
(True; Moderate; p. 191)

36. MAXjet Airways’ value proposition is based on providing only economy class travel
from New York to London (much like Southwest Airlines in the United States).
(False; Challenging; p. 191)

37. The “Marlboro man” is a classic example of copy positioning.

(True; Moderate; p. 192)

Short Answer

38. Who does Banco Azteca cater to and why?

Banco Azteca targets the 16 million Mexican households who earn $250–$1,300 per
month because this segment is of little interest to other banks.
(Challenging; p. 189)

39. Give an example of an industry that utilizes service tiering.

Hotels, airlines, car rentals, hardware and software support, healthcare insurance,
cable television, and credit cards.
(Easy, p. 190)

40. Give an example of service tiering in the airline industry.

Classes (first, business, economy),

(Easy; p. 191)

41. Give an example of a key service attribute or physical element used in car rental
service tiering.

Degree of luxury (vehicle size).

(Moderate; p. 191)

42. Give an example of a service firm that utilizes copy positioning and how they use it.

McDonald’s attempts to appear kid friendly (including its emphasis on Ronald

McDonald).
(Moderate; p. 192)

56
Essay

43. Describe Royal Bank of Canada’s segmentation strategy and how they are able to
successfully accomplish it.

Royal Bank of Canada employs a micro-segmentation strategy, whereby customers

are analyzed and broken down into many segments each month. This strategy allows
financial offerings to be most effectively and efficiently targeted to current
customers. The segmentation variables include credit risk profile, current and
projected profitability, life stage, likelihood of leaving the bank, channel preference,
product activation, and propensity to purchase another product. The bank runs
models based on complex algorithms that can slice the customer database into tightly
profiled micro-segments and can help predict how segments will react to a specific
offering.
(Moderate; p. 188)

44. Discuss who Banco Azteca’s customers are and some of the unique ways Banco
Azteca goes about servicing them.

Banco Azteca is a Mexican bank opened in 2002 that targets consumers with
monthly incomes of $250–$1,300, working at jobs such as taxi drivers, factory
hands, and teachers. Only one in twelve of these workers have a savings account.
The bank is located inside more than 900 Elektra appliance stores, but also takes its
loan service to people with its 3,000-strong motorcycle agents. Many of the
appliances are bought on credit and loans may often use customers’ previously
purchased possessions as collateral.
(Moderate; p. 189)

45. Discuss the analysis that took place to develop Bright Horizons and the ways in
which they overcame unappealing industry characteristics.

Bright Horizons (BH) is a childcare company that was born from an industry with
many unappealing characteristics. The firm’s analysis showed an industry with no
barriers to entry, chronically low margins, high labor intensity, no proprietary
technology, low economies of scale, weak brand distinction, and heavy regulatory
oversight. Instead of establishing new independent centers, BH formed partnerships
with companies to provide daycare services to employees with small children. The
advantages over traditional methods included a powerful, low-cost marketing
channel, a partner to supply the capital to build and outfit the centers, a partner with
a vested interest in the success of the programs, and proximity benefits to parents.
(Moderate; p. 193)

57