Creation of Development of Service Products

• Creating a service concept is the initial step in building an overall service model. This task focuses our attention on the first of the 8Ps, Product Elements. All service organizations face choices concerning the types of products to offer and how to deliver them to customers.

Plan

ning

and

Cre

ating

Se

rvic

es• Augmenting the Core Product– Services are usually defined with

reference to a particular industry. For example, transportation or healthcare. However, delivery of this core product is typically accompanied by a variety of other service-related activities that we refer to collectively as supplementary services, which facilitate use of the core product and add value and differentiation to the customer’s overall experience.

TRANSPORT

Food and

drinks

In-flightservice

Pre-Flight

Service

Post-Flight

Service

Service frequency

VehiclePRICE

DISTRIBUTION

Marketing Positioning

I

T

ntangible

angible

Des

igni

ng a

Ser

vice

Co

ncep

t• Core Product– This is the central component that

supplies the principal, problem-solving benefits customers seek. For instance, transport solves the need to move a person or a physical object from one location to another; or repair services restore a damaged or malfuntioning machine to good working order.

Des

igni

ng a

Ser

vice

Co

ncep

t• Supplementary Services– These augment the core product, both

facilitating its use and enhancing its value and appeal. The extent and level of supplementary services often play a role in differentiating and positioning the core product against competing services. Adding more supplementary elements or increasing the level of performance should be done in ways that enhance the perceived value of the core product for prospective customers and enable the service provider to charge higher price

Des

igni

ng a

Ser

vice

Co

ncep

t• Delivery Processes– The 3rd component concerns the

processes used to deliver both the core product and each of the supplementary services. The design of the service offering must address the following issues:• How the different service components are

delivered to the customer• The nature of the customer’s role in those

processes• How long delivery lasts• The prescribed level and style of service to

be offered.

I

SB O

C

EP

H

CORE

The Flower of Service: Core Product Surrounded by a Cluster of Supplementary Services

• Supplementary services play one of two roles. Facilitating supplementary services are either required for service delivery or aid in the use of the core product. Enhancing supplementary services add extra value for customers. There are potentially dozens of different supplementary services, but almost all of them can be classified into one of the 8 clusters.

The

Flow

er o

f Ser

vice

The Flower of Service

• Facilitating Services– Information– Order-taking– Billing– Payment

• Enhancing Services– Consultation– Hospitality– Safekeeping– Exceptions

Information

• To obtain full value from any good or service, customers need relevant information. Thus, companies should make sure the information they provide is both timely and accurate, because inaccurate information can annoy or cause inconvenience among customers.

Examples of Information Elements• Directions to service site• Schedules/service hours• Prices• Instructions on using core product/supplementary services• Reminders• Warnings conditions of sale/service• Notification of changes• Documentation• Confirmation of reservations• Summaries of account activity• Receipts and tickets

Order-Taking

• Once customers are ready to buy, a key supplementary element comes into play – accepting aplications, orders, and reservations. The process of order-taking should be polite, fast, and accurate, so that customers do not waste time and endure unnecessary mental or physical effort.

Examples of Order-Taking Elements• Applications

– Membership in clubs or programs– Subscription services (i.e. utilities)– Prerequisite-based services (i.e. college enrollment)

• Order Entry– On-site order fulfillment– Mail/telephone order placement– Email/website order placement

• Reservations and Check-In– Seats/tables/rooms– Vehicles or equipment rental– Professional appointments– Admission to restricted facilities (i.e. museums)

Billing

• This is common to almost all services (unless the service is provided free of charge). Inaccurate, illegible, or incomplete bills risk disappointing customers who may, up to that point, have been quite satisfied with their experience. Billing should also be timely, because it stimulates faster payent.

Examples of Billing Elements

• Periodic statements of account activity• Invoices for individual transactions• Verbal statements of amount due• Machine display of amount due• Self-billing (computed by customer)

Payment

• In most cases, a bill requires the customer to take action on payment. Increasingly, customers expect ease and convenience of payment, including credit, when they make purchases in their own countries and while traveling abroad. A variety of options exist for customers to make payment.

Examples of Payment Elements

• Self-Service– Insert card, cash, or token in machine– Electronic funds transfer– Mail a check– Enter credit card number online

• Direct to Payee or Intermediary– Cash handling and change giving– Check handling– Credit/charge/debit card handling– Coupon redemption– Tokens, vouchers, etc.

• Automated deduction from Financial Deposits Control and Verification– Automated systems (i.e. machine-readable tickets that operate entry gates)– Human systems (i.e. toll collectors, ticket inspectors)

Consultation

• This involves a dialog to probe customer requirements and then develop a tailored solution. Effective consultation requires an understanding of each customer’s current situation, before suggesting a suitable course of action.

Examples of Consultation Elements

• Customized advice• Personal counseling• Tutoring/training in product use• Management or technical

consulting

Hospitality

• Hospitality-related services should, ideally, reflect pleasure at meeting new customers and greeting old ones when they return.

• The quality of hospitality services offered by a firm plays an important role in determining your satisfaction (or dissatisfaction) with the core product.

Examples of Hospitality Elements

• Greeting• Food and beverages• Toilets and washrooms• Waiting facilities and amenities

– Lounges, waiting areas, seating– Weather protection– Magazines, entertainment, newspapers

• Transport• Security

Safekeeping

• When customers are visiting a service site, they often want assistance with their personal possessions. In fact, unless certain safekeeping services are provided (i.e. safe and convenient parking spaces), some customers may not come at all.

Examples of SafekeepingElements

• Caring for Possessions Customers Bring with Them– Child care– Pet care– Parking facilities for vehicles– Valet parking– Coatrooms– Baggage handling– Storage space– Safe deposit boxes– Security personnel

• Caring for Goods Purchased (for Rented) by Customers– Packaging– Pickup– Transportation and delivery– Installation– Inspection and diagnosis– Cleaning– Refueling– Preventive maintenance– Repairs and renovation– Upgrade

Exceptions

• These involve supplementary services that fall outside the routine of normal service delivery. Astute businesses anticipate exceptions and develop contingency plans and guidelines in advance. That way, employees will not appear helpless and surprised when customers ask for special assistance.

Types of Exceptions

• Special Requests• Problem Solving• Handling of

complaints/suggestions/compliments• Restitution

Examples of Exceptions Elements• Special Requests in Advance of

Service Delivery– Children’s Needs– Dietary requirements– Medical or disability needs– Religious observances– Deviations from standard

operating procedures

• Handling Special Communications– Complaints– Compliments– Suggestions

• Restitution– Refunds– Compensation in kind for

unsatisfactory goods and services

– Free repair of defective goods

• Problem Solving– Warranties and guarantees against

product malfunction– Resolving difficulties that aris from

using the product– Resolving difficulties caused by

accidents, service failures, and problems with staff or other customers

– Assisting customers who have suffered an accident or medical emergency

Planning and Branding Service Products

• A product implies a defined and consistent “bundle of output” and also the ability to differentiate one bundle of output from another.

• Providers of more intangible services also offer a “menu” of products, representing an assembly of carefully prescribed elements built around the core product, and may bundle in certain value-added supplementary services.

• Most service organizations offer a line of products rather than just a single product. As a result, they must choose among three broad alternatives: using a single brand to cover all products and services, a separate stand-alone brand for each offering, or some combination of these two extremes

Plan

ning

and

Bra

ndin

g Se

rvic

e Pr

oduc

ts

Corporate Branding Individual Product Branding

“Branded House” Sub-Brands Endorsed Brands House of Brands

The Spectrum of Branded Alternatives

Development of New Services

• Competitive intensity and customer expectations are increasing in nearly all service industries. Thus, success lies not only in providing existing services well, but also in creating new approaches to service. Because the outcome and process aspects of a service often combine to create the experience and benefits received by customers, both aspects must be addressed in development of new services.

• Major service innovations – new core products for markets that have not been previously defined. They usually include both new service characteristics and radical new processes.– FedEx introduced overnight,

nationwide, express package delivery in 1971.

A H

iera

rchy

of N

ew

Serv

ice

Cate

gorie

s

• Major process innovations – consist of using new processes to deliver existing core products in new ways with additional benefits.– University of Phoenix delivers

undergraduate and graduate degree programs in a nontraditional way – online!

• Product Line Extensions – additions to current product lines by existing firms.– Banks retail insurance products

• Process Line Extensions – represent distinctive new ways of delivering existing products, either with the intent of offering more convenience and a different experience for existing customers or of attracting customers who find the traditional approach unappealing.– Barnes and Noble, the leading

bookstore chain in the US, added internet retailing through BarnesandNoble.com

• Supplementary Service Innovations – take the form of adding new facilitating or enhancing service elements to an existing core service, or of significantly improving an existing supplementary service.– Rainforest Café is designed to keep

customers entertained with aquariums, live parrots etc.

• Service improvements are the most common type of innovation. They involve modest changes in the performance of current products, including improvements to either the core product or to existing supplementary services

• Style changes – represent the simplest type of innovation, typically involving no changes in either processes or performance.– Repainting retail branches– New uniforms for employees– Minor changes in service scripts for

employees

• The design of service process has implications not only for customers but also for the cost, speed, and productivity with which the desired outcome is achieved.

• Reengineering involves analyzing and redesigning processes to achieve faster and better performance.

Reen

gine

erin

g Se

rvic

e Pr

oces

ses

• The design of service process has implications not only for customers but also for the cost, speed, and productivity with which the desired outcome is achieved.

• Reengineering involves analyzing and redesigning processes to achieve faster and better performance.

Phys

ical

Goo

ds a

s a

Sour

ce

of N

ew S

ervi

ce Id

eas

• If a company is designing a new service from scratch, how can it figure out what features and price will create the best value for target customers?

• Marriott, through research filled a gap in the market with a product that represented the best balance between the price customers were prepared to pay and the physical and service features they most desired.U

sing

Res

earc

h to

Des

ign

New

Ser

vice

s