developing service concepts
TRANSCRIPT
DEVELOPING SERVICE CONCEPTS- CORE AND SUPPLEMENTARY ELEMENTS
1 st P= Product
OVERVIEW
Creating a service concept- first part in
creating a service model
Focus on first P- product element
All service org- face choices concerning the
type of products to offer and how to deliver
Useful to distinguish the core elements and
supplementary elements which enhance the
use
WHAT IS A SERVICE PRODUCT?
Mfged goods- camera fuel- title to physical objects
Service performances- are experienced than owned- even when there are physical elements involved to the title- cooked meal, valve replacement – significant portion of the price paid by customers is for value added by service elements- expert labor and special equipment
Service element comprises all the elements of the service performance both tangible and intangible that create value for customers
CORE PRODUCT AUGMENTATION
Services- defined with ref to a particular industry- based on core set of benefits and solutions delivered to the customer
Core product is typically accompanied by variety of other service related activities such as supplementary services
These ss facilitate the use of the core product and add value and differentiation to the customers overall experience
Core products- commodities as the industry matures and competition increases- hence emphasize on supplementary services
SHOSTACK MOLECULAR MODEL
Service concept: core and supplementary combination
Centre: core benefit- addressing the basic customer need- linked to a series of other service characteristics
Helps in identification of tangible and intangible elements in a service delivery
Eg airline: intangible:transportation,service frequency, pre,in and post flight service. Tangible: aircraft and food
Key
Tangible Elements
Intangible Elements
AUGMENTING THE CORE PRODUCT
Marketing Positioning(weighted toward evidence)
Shostack’s Molecular Model: Passenger Airline Service
Distribution
Pre- & Postflight Service
Service Frequency
In-flight Service
Food & Drink
Vehicle
Transport
Price
Source: Shostack
SERVICE CONCEPT DESIGN
Marketers recognize the need to take a holistic view of the overall performance that they want the customers to experience, highlighting the specific dimensions on which the firm plans to compete
Value proposition- must address and integrate the 3 comp: core product + supplementary service and delivery process
Core product
•Central component that supplies the principal problem solving need that the customers need •Eg transport,repair services etc
Supplementary services•Augment the core product ,both facilitating its use and enhancing its value and appeal• These help- extent and value in differentiating and positioning core product against competing services• Adding more ss- enhances the perceived value of the core product for prospects and enables the service providers to charge a higher price
Delivery process
•Concerns the process used to deliver core product and ss•Service design usually addresses: how differently service components are delivered to the customer,nature of customers role in process,length of delivery,and Rxed level and style of service offered
CORE AND SUPPLEMENTARY PRODUCT DESIGN:AN INTEGRATED PERSPECTIVE
SchedulingNature of Process
Service Level
Customer Role
Supplementaryservices offeredand delivered
Delivery Concept for Core Product
SERVICE OFFERING FOR OVERNIGHT HOTEL STAY
Core
Reservation
Parking
Checkin/out
Porter
Meal
Cable tv
Phone
Room Service
Core Delivery process
Supplementary
services
CORE AND SUPPLEMENTARY SERVICES AT LUXURY HOTEL (OFFERING MUCH MORE THAN CHEAP MOTEL!)
ReservationValet Parking
Reception
BaggageService
CocktailBar
Restaurant
Entertainment/ Sports/ Exercise
Internet
Wake-upCall
RoomService
BusinessCentre
Cashier
A Bed for the Night in an Elegant Private Room with a Bathroom
WHAT HAPPENS, WHEN, IN WHAT SEQUENCE? TIME DIMENSION IN AUGMENTED PRODUCT
Before Visit
Reservation
internet
Parking Get car
Check in
Porter
Use room
MealPay TV
Room service
Internet
Check out
Time Frame of An Overnight Hotel Stay(Real-time service use)
USE GUESTROOM OVERNIGHT
Internet
DOCUMENTING THE DELIVERY SEQUENCE OVER TIME
Design the service concept – will address the sequence in which customers will use each of the core and supplementary services and to determine the approx length of time in each instance
Req good understanding of customer needs ,habits, expectations- for mktg, planning, operations and personnel allocation
Certain industries: neither core nor supplementary services are delivered continuously
FLOWCHARTING
FC: a technique for displaying the nature and sequence of steps involved in delivering service to customers- to understand the totality of the customers service experience
Useful for distinguishing steps at which customer uses the core service and those involving service elements that supplement the core product
nature of customers involvement with service org varies amongst each category of service- people processing, mental stimulus, possession and information
PEOPLE PROCESSING
Arrive at hotel
Check in
Spend
night in room
Breakfast
Checkout
1 2 3 4 5
3: core product1,2,4,5: visible action3: benefits recvd
POSSESSION PROCESSING
Travel to store
Tech exami
nes player
, diagnoses the
problem
Leave
store
Return,pick and play
Play at home
1 2 3 4 5
5: core product1,2,3,4, : visible actionTech repair: invisible action
INFORMATION PROCESSING
Learn abt options
Select
plan,complete form
s
Pay
Insuranc
e cover
begins
Printed policy arrives
1 2 3 4 5
4: core product1,2,3,5, : visible actionTerms of coverage,cust info in database: invisible action
THE FLOWER OF SERVICE
THE FLOWER OF SERVICE
Core
Information
Consultation
Order Taking
Hospitality
Payment
Billing
Exceptions
Safekeeping
Facilitating elements Enhancing elements
KEY:
THE FLOWER OF SERVICE
Supplementary services- play one of the two
roles
Facilitating ss: are required for service
delivery or aid in the use of core product
Enhancing supplementary services add extra
value for customers
HOW TO DETERMINE WHAT SUPPLEMENTARY SERVICES SHOULD BE OFFERED
Not every core product is surrounded by all eight supplementary
elements
Nature of product helps to determine:
Which supplementary services must be offered
Which might usefully be added to enhance value and ease of use
People-processing and high-contact services have more
supplementary services
Market positioning strategy determines which supplementary
services should be included
Firms with different levels of service often add extra supplementary
services for each upgrade in service level
THE FLOWER OF SERVICE: FACILITATING SERVICES—INFORMATION
Core
Customers often require information about how to obtain and use a product or service.
Examples of elements:
Directions to service site Schedule/service hours Prices Conditions of sale Usage instructions
THE FLOWER OF SERVICE:FACILITATING SERVICES—ORDER TAKING
Core
Customers need to know what is available and may want to secure commitment to delivery. The process should be fast and smooth.
Examples of elements:
Applications Order entry Reservations and check-in
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 of account activity Machine display of amount due
THE FLOWER OF SERVICE:FACILITATING SERVICES—PAYMENT
Core
Customers may pay faster and more cheerfully if youmake transactions simpleand convenient for them.
Examples of elements:
Self service payment Direct to payee or intermediary Automatic deduction
Core
THE FLOWER OF SERVICE:ENHANCING SERVICES—CONSULTATION
Value can be added to goods and services by offering advice and consultation tailored toeach customer’s needs and situation.
Examples of elements:
Customized advice Personal counseling Management consulting
THE FLOWER OF SERVICE:ENHANCING SERVICES—HOSPITALITY
Customers who invest time and effort in visiting a business and using 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
Core
THE FLOWER OF SERVICE:ENHANCING SERVICES—SAFEKEEPING
Customers prefer not to worry about looking after the personal possessions that they bring with them to a service site.
Examples of elements:
Looking after possessions customers bring with them Caring for goods purchased (or rented) by customers
Core
THE FLOWER OF SERVICE:ENHANCING SERVICES—EXCEPTIONS
Customers appreciate some flexibility when they make special requests and expect responsiveness when things don’t go according to plan.
Examples of elements:
Special requests in advance Complaints or compliments Problem solving Restitution
MANAGERIAL IMPLICATIONS
To develop product policy and pricing strategy, managers need to determine: Which supplementary services should be offered as a
standard package or as fee based options Firms that compete on a low-cost, no-frills basis
needs fewer supplementary elements than those marketing expensive, high-value-added services
Each flower petal must receive consistent care and concern to remain fresh and appealing
Planning and Branding Service Products
BRANDING ALTERNATIVES
Purpose of branding is to establish a mental picture of the service and clarify the value proposition
Service marketers need to be their brand champions Branding alternatives are:
Branded House – brand name to multiple offerings in unrelated fields e.g. Virgin Group
Sub Brands – master brand is primary frame of reference but product has a distinctive name e.g. Singapore Airlines Raffles Class
Endorsed Brands – Product brand dominates the corporate name
e.g. hotels House of Brands – corporation with a number of
products, each promoted under its own brand name e.g. Proctor & Gamble
Developing New Services
A HIERARCHY OF NEW SERVICE CATEGORIES
Range from major innovations to simple style changes:1. Major service innovations
New core products for previously undefined markets
2. Major process innovations Using new processes to deliver existing products with
added benefits
3. Product-line extensions Additions to current product lines
4. Process-line extensions Alternative delivery procedures
A HIERARCHY OF NEW SERVICE CATEGORIES
5. Supplementary service innovations Addition 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
REENGINEERING SERVICE PROCESSES
Reengineering involves analyzing and redesigning processes to achieve faster and better performance Running tasks in parallel instead of sequence can
reduce/eliminate dead time Examination of processes can lead to creation of
alternative delivery methods that constitute new service concepts Add/eliminate supplementary services Resequence delivery of service elements Offer self-service options
PHYSICAL GOODS AS A SOURCE OF NEW SERVICE IDEAS
Services can be built around rentals: Alternatives to owning a physical good and/or doing work oneself Customers can rent goods—use and return for a fee—instead
of purchasing them Customers can hire personnel to operate own or rented
equipment Any new durable good may create need for after-sales services
now and in future—possession processing Shipping Installation Problem-solving and consulting advice Cleaning and maintenance Upgrades Removal and disposal
CREATING SERVICES AS SUBSTITUTES FOR OWNING AND/OR USING GOODS
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 Type
Hire a Taxi or Limousine
Send Work Out to a Secretarial Service
Own a Physical Good Rent Use of a Physical Good
Perform Work Oneself
Hire Someone to Do Work
CATERPILLAR PROMOTES ITS SERVICE BUSINESSES (FIG 3.11)
Reprinted Courtesy of Caterpillar, Inc.
ACHIEVING SUCCESS IN DEVELOPING NEW SERVICES
Services are not immune to high failure rates that plague new manufactured products “dot.com” companies
In developing new services Core product is of secondary
importance Ability to maintain quality of
the total service offering is key
Accompanying marketing support activities are vital
Market knowledge is of utmost importance
SUCCESS FACTORS IN NEW SERVICE DEVELOPMENT
Market synergy Good fit between new product and firm’s image/resources Advantage versus competition in meeting customers’ needs Strong support from firm during/after launch Firm understands customer purchase decision behavior
Organizational factors Strong interfunctional cooperation and coordination Internal marketing to educate staff on new product and its
competition Employees understand importance of new services to firm
Market research factors Scientific studies conducted early in development process Product concept well defined before undertaking field studies
SUMMARY : DEVELOPING SERVICE CONCEPTS
Planning and creating services involve: Augmenting core product Designing core product, supplementary services, and delivery
process Documenting delivery sequence over time with flowcharts Gaining insights from flowcharting
Flower of service includes core product and two types of supplementary services: facilitating and enhancing Facilitating services include information, order taking, billing, and
payment Enhancing services include consultation, hospitality, safekeeping,
and exceptions Spectrum of branding alternatives exists for services
Branded house Sub-brands Endorsed brands House of brands
SUMMARY : DEVELOPING SERVICE CONCEPTS
Seven categories of new services: Major service innovations Major process innovations Product-line extensions Process-line extensions Supplementary service innovations Service improvements Style changes
To develop new services, we can Reengineer service processes Use physical goods as a source of new service ideas Use research to design new services Achieve success in developing new services