developing service concepts

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DEVELOPING SERVICE CONCEPTS- CORE AND SUPPLEMENTARY ELEMENTS 1 st P= Product

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Page 1: Developing service concepts

DEVELOPING SERVICE CONCEPTS- CORE AND SUPPLEMENTARY ELEMENTS

1 st P= Product

Page 2: Developing service concepts

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

Page 3: Developing service concepts

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

Page 4: Developing service concepts

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

Page 5: Developing service concepts

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

Page 6: Developing service concepts

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

Page 7: Developing service concepts

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

Page 8: Developing service concepts

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

Page 9: Developing service concepts

CORE AND SUPPLEMENTARY PRODUCT DESIGN:AN INTEGRATED PERSPECTIVE

SchedulingNature of Process

Service Level

Customer Role

Supplementaryservices offeredand delivered

Delivery Concept for Core Product

Page 10: Developing service concepts

SERVICE OFFERING FOR OVERNIGHT HOTEL STAY

Core

Reservation

Parking

Checkin/out

Porter

Meal

Cable tv

Phone

Room Service

Core Delivery process

Supplementary

services

Page 11: Developing service concepts

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

Page 12: Developing service concepts

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

Page 13: Developing service concepts

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

Page 14: Developing service concepts

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

Page 15: Developing service concepts

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

Page 16: Developing service concepts

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

Page 17: Developing service concepts

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

Page 18: Developing service concepts

THE FLOWER OF SERVICE

Page 19: Developing service concepts

THE FLOWER OF SERVICE

Core

Information

Consultation

Order Taking

Hospitality

Payment

Billing

Exceptions

Safekeeping

Facilitating elements Enhancing elements

KEY:

Page 20: Developing service concepts

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

Page 21: Developing service concepts

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

Page 22: Developing service concepts

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

Page 23: Developing service concepts

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

Page 24: Developing service concepts

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

Page 25: Developing service concepts

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

Page 26: Developing service concepts

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

Page 27: Developing service concepts

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

Page 28: Developing service concepts

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

Page 29: Developing service concepts

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

Page 30: Developing service concepts

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

Page 31: Developing service concepts

Planning and Branding Service Products

Page 32: Developing service concepts

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

Page 33: Developing service concepts

Developing New Services

Page 34: Developing service concepts

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

Page 35: Developing service concepts

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

Page 36: Developing service concepts

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

Page 37: Developing service concepts

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

Page 38: Developing service concepts

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

Page 39: Developing service concepts

CATERPILLAR PROMOTES ITS SERVICE BUSINESSES (FIG 3.11)

Reprinted Courtesy of Caterpillar, Inc.

Page 40: Developing service concepts

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

Page 41: Developing service concepts

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

Page 42: Developing service concepts

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

Page 43: Developing service concepts

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