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Chapter 3:DevelopingService Concepts:Core andSupplementary Elements
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Overview of Chapter 3
Planning and Creating Services
The Flower of Service
Planning and Branding Service Products
Development of New Services
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Planning and Creating Services
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Planning and Creating Services
A service product comprises all elements of serviceperformance, both tangible and intangible, that createvalue for customers
The service concept is represented by:A core productAccompanied by supplementary services
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Core Products andSupplementary Services
In mature industries, core products often becomecommodities
Supplementary services help to differentiate coreproducts and create competitive advantage by:
Facilitating use of core product (a service or a good)Enhancing the value and appeal of the core product
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Key
Tangible Elements
Intangible Elements
Augmenting the Core Product (Fig 3.1)
Marketing Positioning
(weighted toward evidence)
Figur e 3.1
Shostack s MolecularModel : PassengerAir l ine Service
Distribution
Pre- &Postflight
Service
ServiceFrequency
In-flightService
Food &Drink
Vehicle
Transport
Price
Source : Shos tack
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Augmenting the Core Product
Are supplementary services needed to facilitate use ofcore product or simply to add extra appeal?
Should customers be charged separately for each serviceelement?
Or should all elements be bundled at a single price?
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Designing a Service Concept
Core ProductCentral component that supplies the principal, problem-solvingbenefits customers seek
Supplementary ServicesAugment the core product, facilitating its use and enhancing itsvalue and appeal
Delivery Processes
Used to deliver both the core product and each of thesupplementary services
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Core and Supplementary Product Design:An Integrated Perspective (Fig 3.2)
Scheduling Nature ofProcess
ServiceLevel
CustomerRole
Supplementaryservices offeredand delivered
Delivery Concept
for Core Product
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Documenting Delivery SequenceOver Time
Must address sequence in which customers will useeach core and supplementary service
Determine approximate length of time required foreach step
Customers may budget a specific amount of time for an activityInformation should reflect good understanding ofcustomers, especially their:
NeedsHabits
Expectations
Question: Do customers expectations change duringservice delivery in light of perceived quality of eachsequential encounter?
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Core and Supplementary Services at Luxury Hotel(Offering Much More than Cheap Motel!)
Reservation Valet
Parking
Reception
BaggageService
CocktailBar
Restaurant Entertainment/
Sports/Exercise
Internet
Wake-upCall
RoomService
Business
Center
Cashier
A Bed for theNight in an
Elegant PrivateRoom with a
Bathroom
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What Happens, When, in What Sequence?Time Dimension in Augmented Product (Fig 3.3)
Before Visit
Reservation
in ternet
Parking Get car
Check in
Por ter
User o o m
MealPay TV
Room serv ice
InternetCheck out
Time Frame of An Overnight Hotel Stay(Real- ti me service use)
USE GUESTROOM OVERNIGHT
Internet
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Flowcharting Service DeliveryHelps to Clarify Product Elements
Offers way to understand totality of customersservice experience
Useful for distinguishing between core productitself and service elements that supplement core
Restaurants: Food and beverage (core)Reservations (supplementary services)
Shows how nature of customer involvement withservice organizations varies by type of service:
People processing
Possession processingMental Stimulus processingInformation processing
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Defining Core and SupplementaryElements of Our Service Product
How is our core product defined and what supplementaryelements augment it?What product benefits create most value for customers?Is our service package differentiated from competition inmeaningful ways for target customers?What are current levels of service on core product and eachsupplementary element?Can we charge more for higher service levels? For example:
Faster response and execution
Better physical amenitiesEasier accessHigher staffing levelsSuperior caliber personnel
Alternatively, should we cut service levels and charge less?
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Simple Flowchart for Delivery of aPeople-Processing Service (Fig 3.4)
Park Car Check In
Spend
Night inRoom BreakfastCheck
Out
BreakfastPrepared
MaidMakes up
Room
Peop le Process ing Stay at Mot el
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Simple Flowchart for Delivery of aPossession-Processing Service (Fig 3.4)
Possess ion Process ing Repair a DVD Player
Travel to
Store
Technician Examines
Player, DiagnosesProblem
LeaveStore
Return, Pick up
Player and Pay
Technician Repairs Player
(Later) Play
DVDs at Home
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Simple Flowchart for Delivery of MentalStimulus-Processing Service (Fig 3.4)
Mental St imulu s Process in g Weather Forecast
Turn on TV, Select
Channel
View Presentation of
Weather Forecast
TV WeatherpersonPrepares Local
Forecast
Confirm Plans for
Picnic
Meteorologists Input Datato Models and CreatesForecast from Output
CollectWeather
Data
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Weather Forecasting Is a ServiceDirected at Customers Minds (Fig 3.5)
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Simple Flowchart for Delivery of AnInformation-Processing Service (Fig 3.4)
In fo rm ation Process ing Health Ins uran ce
Learn aboutOptions
Select Plan,Complete Forms Pay
Customer InformationEntered in Database
Printed Policy
DocumentsArrive
InsuranceCoverage Begins
University and InsuranceCompany Agree on Terms of
Coverage
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The Flower of Service (Fig 3.6)
Core
Information
Consultation
Order Taking
Hospitality
Payment
Billing
Exceptions
Safekeeping
Facilitating elements Enhancing elements
KEY :
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How to Determine What SupplementaryServices Should Be Offered
Not every core product is surrounded by supplementary elementsfrom all eight clusters
Nature of product helps to determine:Which supplementary services must be offered
Which might usefully be added to enhance value and ease of doingbusiness with the organization
People-processing and high-contact services tend to have moresupplementary services
Market positioning strategy helps to determine whichsupplementary services should be included
Firms that offer different levels of service often add extrasupplementary services for each upgrade in service level
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The Flower of Service:Facilitating Services Information
Core
Customers often requireinformation about how to obtainand use a product or service.
Examples of elements:
Directions to service site Schedule/service hours Prices Conditions of sale
Usage instructions
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The Flower of Service:Facilitating Services Order Taking
Core
Customers need to know whatis available and may want tosecure commitment todelivery. The process shouldbe fast and smooth.
Examples of elements:
Applications Order entry Reservations and check-in
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The Flower of Service:Facilitating Services Billing
Core
How much do I owe you? Bills should be clear,Accurate, and intelligible.
Examples of elements:
Periodic statements ofaccount activity
Machine display of amount
due
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The Flower of Service:Facilitating Services Payment
Core
Customers may pay fasterand more cheerfully if youmake transactions simpleand convenient for them.
Examples of elements:
Self service payment Direct to payee or intermediary Automatic deduction
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Core
The Flower of Service:Enhancing Services Consultation
Value can be added to goodsand services by offering adviceand consultation tailored toeach customer s needs andsituation.
Examples of elements:
Customized advice Personal counseling Management consulting
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The Flower of Service:Enhancing Services Hospitality
Customers who invest time andeffort in visiting a business andusing its services deserve to betreated as welcome guests after all, marketing invited them!
Examples of elements:
Greeting Waiting facilities and amenities Food and beverages Toilets and washrooms Security
Core
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Core
The Flower of Service:Enhancing Services Safekeeping
Customers prefer not to worryabout looking after the personalpossessions that they bringwith them to a service site.
Examples of elements:
Looking after possessionscustomers bring with them
Caring for goods purchased
(or rented) by customers
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Core
The Flower of Service:Enhancing Services Exceptions
Customers appreciate someflexibility when they makespecial requests and expectresponsiveness when things
don t go according to plan.
Examples of elements:
Special requests in advance Complaints or compliments Problem solving Restitution
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Managerial Implications
To develop product policy and pricing strategy, managersneed to determine:
Which supplementary services should be offered as a standardpackage accompanying the core
Which supplementary elements could be offered as options for anextra charge
In general, firms that compete on a low-cost, no-frillsbasis needs fewer supplementary elements than thosemarketing expensive, high-value-added services
Each flower petal must receive consistent care andconcern to remain fresh and appealing
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Developing New Services
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A Hierarchy ofNew Service Categories (1)
1. Major service innovationsNew core products for previously undefined markets
2. Major process innovations
Using new processes to deliver existing products with addedbenefits
3. Product-line extensionsAdditions to current product lines
4. Process-line extensionsAlternative delivery procedures
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A Hierarchy ofNew Service Categories (2)
5. Supplementary service innovationsAddition of new or improved facilitating or enhancing elements
6. Service improvements
Modest changes in the performance of current products
7. Style changes
Visible changes in service design or scripts
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Physical Goods as a Source OfNew Service Ideas
Services can be built around rentals: Alternatives toowning a physical good and/or doing work oneselfCustomers can rent goods use and return for a fee instead ofpurchasing themCustomers can hire personnel to operate own or rented equipment
Any new durable good may create need for after-salesservices now and in future possession processing
ShippingInstallation
Problem-solving and consulting adviceCleaning and maintenanceUpgradesRemoval and disposal
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Creating Services as Substitutes forOwning and/or Using Goods (Fig 3.10)
Drive Own Car
Use Own Computer
Rent a Car and Drive it
Rent Use of Computer
Hire a Chauffeur to Drive
Hire a Typist to TypeHire a Taxi or LimousineSend Work Out to aSecretarial Service
Own a Physical GoodRent Use of a
Physical Good
Perform WorkOneself
Hire Someoneto Do Work
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Achieving Success in DevelopingNew Services
Services are not immune to highfailure rates that plague newmanufactured products
dot.com companies
In developing new servicesCore product is of secondaryimportanceAbility to maintain quality of thetotal service offering is keyAccompanying marketing supportactivities are vitalMarket knowledge is of utmostimportance
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Success Factors inNew Service Development
Market synergyGood fit between new product and firms image/resources Advantage versus competition in meeting customers needs Strong support from firm during/after launchFirm understands customer purchase decision behavior
Organizational factorsStrong interfunctional cooperation and coordinationInternal marketing to educate staff on new product and itscompetition
Employees understand importance of new services to firmMarket research factors
Scientific studies conducted early in development processProduct concept well defined before undertaking field studies
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Summary of Chapter 3:Developing Service Concepts (1)
Planning and creating services involve:Augmenting core productDesigning core product, supplementary services, and delivery processDocumenting delivery sequence over time with flowchartsGaining insights from flowcharting
Flower of service includes core product and two types ofsupplementary services: facilitating and enhancing Facilitating services include information, order taking, billing, and payment Enhancing services include consultation, hospitality, safekeeping, andexceptions
Spectrum of branding alternatives exists for servicesBranded houseSub-brandsEndorsed brandsHouse of brands
f h
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Summary of Chapter 3:Developing Service Concepts (2)
Seven categories of new services:Major service innovationsMajor process innovationsProduct-line extensionsProcess-line extensionsSupplementary service innovations
Service improvementsStyle changes
To develop new services, we canReengineer service processesUse physical goods as a source of new service ideas
Use research to design new servicesAchieve success in developing new services
