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 se...
WHAT IS A SERVICE PRODUCT?
 Mfged goods- camera fuel- title to physical objects
 Service performances- are experienced t...
CORE PRODUCT AUGMENTATION
 Services- defined with ref to a particular industry-
based on core set of benefits and solutio...
SHOSTACK MOLECULAR MODEL
 Service concept: core and supplementary
combination
 Centre: core benefit- addressing the basi...
Key
Tangible Elements
Intangible Elements
AUGMENTING THE CORE PRODUCT
Marketing Positioning
(weighted toward evidence)
Sho...
SERVICE CONCEPT DESIGN
 Marketers recognize the need to take a holistic
view of the overall performance that they want th...
Core product
• Central component
that supplies the
principal problem
solving need that the
customers need
• Eg transport,r...
CORE AND SUPPLEMENTARY PRODUCT DESIGN:
AN INTEGRATED PERSPECTIVE
Scheduling
Nature of
Process
Service Level Customer
Role
...
SERVICE OFFERING FOR OVERNIGHT HOTEL
STAY
Cor
e
Reservatio
n
Parking
Checkin/o
ut
Porter
Meal
Cable tv
Phone
Room
Service
...
CORE AND SUPPLEMENTARY SERVICES AT LUXURY HOTEL
(OFFERING MUCH MORE THAN CHEAP MOTEL!)
Reservation
Valet
Parking
Reception...
WHAT HAPPENS, WHEN, IN WHAT SEQUENCE?
TIME DIMENSION IN AUGMENTED PRODUCT
Before Visit
Reservation
internet
Parking Get ca...
DOCUMENTING THE DELIVERY SEQUENCE
OVER TIME
 Design the service concept – will address the
sequence in which customers wi...
FLOWCHARTING
 FC: a technique for displaying the nature and
sequence of steps involved in delivering service to
customers...
PEOPLE PROCESSING
Arrive at
hotel
Check in
Spend
night in
room
Breakfast Checkout
1 2 3 4 5
3: core product
1,2,4,5: visib...
POSSESSION PROCESSING
Travel to store
Tech examines
player, diagnoses
the problem
Leave store
Return,pick and
play
Play at...
INFORMATION PROCESSING
Learn abt
options
Select
plan,complete
forms
Pay
Insurance
cover begins
Printed policy
arrives
1 2 ...
THE FLOWER OF SERVICE
THE FLOWER OF SERVICE
Core
Information
Consultation
Order Taking
Hospitality
Payment
Billing
Exceptions
Safekeeping
Facili...
THE FLOWER OF SERVICE
 Supplementary services- play one of the two roles
 Facilitating ss: are required for service deli...
HOW TO DETERMINE WHAT SUPPLEMENTARY
SERVICES SHOULD BE OFFERED
 Not every core product is surrounded by all eight supplem...
THE FLOWER OF SERVICE:
FACILITATING SERVICES—INFORMATION
Core
Customers often require
information about how to obtain
and ...
THE FLOWER OF SERVICE:
FACILITATING SERVICES—ORDER TAKING
Core
Customers need to know what
is available and may want to
se...
THE FLOWER OF SERVICE:
FACILITATING SERVICES—BILLING
Core
“How much do I owe you?”
Bills should be clear,
Accurate, and in...
THE FLOWER OF SERVICE:
FACILITATING SERVICES—PAYMENT
Core
Customers may pay faster
and more cheerfully if you
make transac...
Core
THE FLOWER OF SERVICE:
ENHANCING SERVICES—CONSULTATION
Value can be added to goods
and services by offering advice
an...
THE FLOWER OF SERVICE:
ENHANCING SERVICES—HOSPITALITY
Customers who invest time and
effort in visiting a business and
usin...
Core
THE FLOWER OF SERVICE:
ENHANCING SERVICES—SAFEKEEPING
Customers prefer not to worry
about looking after the personal
...
Core
THE FLOWER OF SERVICE:
ENHANCING SERVICES—EXCEPTIONS
Customers appreciate some
flexibility when they make
special req...
MANAGERIAL IMPLICATIONS
 To develop product policy and pricing strategy, managers
need to determine:
 Which supplementar...
Planning and Branding Service
Products
BRANDING ALTERNATIVES
 Purpose of branding is to establish a mental picture of
the service and clarify the value proposit...
Developing New Services
A HIERARCHY OF
NEW SERVICE CATEGORIES
Range from major innovations to simple style changes:
1. Major service innovations
...
A HIERARCHY OF
NEW SERVICE CATEGORIES
5. Supplementary service innovations
 Addition of new or improved facilitating or e...
REENGINEERING SERVICE PROCESSES
 Reengineering involves analyzing and redesigning
processes to achieve faster and better ...
PHYSICAL GOODS AS A SOURCE OF NEW SERVICE IDEAS
 Services can be built around rentals: Alternatives to owning a physical
...
CREATING SERVICES AS SUBSTITUTES FOR
OWNING AND/OR USING GOODS
 Drive Own Car
 Use Own Computer
 Rent a Car and Drive i...
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
...
SUCCESS FACTORS IN
NEW SERVICE DEVELOPMENT
 Market synergy
 Good fit between new product and firm’s image/resources
 Ad...
SUMMARY :
DEVELOPING SERVICE CONCEPTS
 Planning and creating services involve:
 Augmenting core product
 Designing core...
SUMMARY :
DEVELOPING SERVICE CONCEPTS
 Seven categories of new services:
 Major service innovations
 Major process inno...
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Developing service concepts

  1. 1. DEVELOPING SERVICE CONCEPTS- CORE AND SUPPLEMENTARY ELEMENTS 1 st P= Product
  2. 2. 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
  3. 3. 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
  4. 4. 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
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. 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
  9. 9. CORE AND SUPPLEMENTARY PRODUCT DESIGN: AN INTEGRATED PERSPECTIVE Scheduling Nature of Process Service Level Customer Role Supplementary services offered and delivered Delivery Concept for Core Product
  10. 10. SERVICE OFFERING FOR OVERNIGHT HOTEL STAY Cor e Reservatio n Parking Checkin/o ut Porter Meal Cable tv Phone Room Service Core Delivery process Supplement ary services
  11. 11. CORE AND SUPPLEMENTARY SERVICES AT LUXURY HOTEL (OFFERING MUCH MORE THAN CHEAP MOTEL!) Reservation Valet Parking Reception Baggage Service Cocktail Bar Restaurant Entertainment/ Sports/ Exercise Internet Wake-up Call Room Service Business Centre Cashier A Bed for the Night in an Elegant Private Room with a Bathroom
  12. 12. WHAT HAPPENS, WHEN, IN WHAT SEQUENCE? TIME DIMENSION IN AUGMENTED PRODUCT Before Visit Reservation internet Parking Get car Check in Porter Use room Meal Pay TV Room service Internet Check out Time Frame of An Overnight Hotel Stay (Real-time service use) USE GUESTROOM OVERNIGHT Internet
  13. 13. 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
  14. 14. 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
  15. 15. PEOPLE PROCESSING Arrive at hotel Check in Spend night in room Breakfast Checkout 1 2 3 4 5 3: core product 1,2,4,5: visible action 3: benefits recvd
  16. 16. POSSESSION PROCESSING Travel to store Tech examines player, diagnoses the problem Leave store Return,pick and play Play at home 1 2 3 4 5 5: core product 1,2,3,4, : visible action Tech repair: invisible action
  17. 17. INFORMATION PROCESSING Learn abt options Select plan,complete forms Pay Insurance cover begins Printed policy arrives 1 2 3 4 5 4: core product 1,2,3,5, : visible action Terms of coverage,cust info in database: invisible action
  18. 18. THE FLOWER OF SERVICE
  19. 19. THE FLOWER OF SERVICE Core Information Consultation Order Taking Hospitality Payment Billing Exceptions Safekeeping Facilitating elements Enhancing elements KEY:
  20. 20. 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
  21. 21. 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
  22. 22. 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
  23. 23. 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
  24. 24. 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
  25. 25. THE FLOWER OF SERVICE: FACILITATING SERVICES—PAYMENT Core Customers may pay faster and more cheerfully if you make transactions simple and convenient for them. Examples of elements:  Self service payment  Direct to payee or intermediary  Automatic deduction
  26. 26. Core THE FLOWER OF SERVICE: ENHANCING SERVICES—CONSULTATION Value can be added to goods and services by offering advice and consultation tailored to each customer’s needs and situation. Examples of elements:  Customized advice  Personal counseling  Management consulting
  27. 27. THE FLOWER OF SERVICE: ENHANCING SERVICES—HOSPITALITY Customers who invest time and effort in visiting a business and using its services deserve to be treated as welcome guests— after all, marketing invited them! Examples of elements:  Greeting  Waiting facilities and amenities  Food and beverages  Toilets and washrooms  Security Core
  28. 28. 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
  29. 29. 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
  30. 30. 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
  31. 31. Planning and Branding Service Products
  32. 32. 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
  33. 33. Developing New Services
  34. 34. 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
  35. 35. 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
  36. 36. 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
  37. 37. 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
  38. 38. 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
  39. 39. CATERPILLAR PROMOTES ITS SERVICE BUSINESSES (FIG 3.11) Reprinted Courtesy of Caterpillar, Inc.
  40. 40. 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
  41. 41. 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
  42. 42. 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
  43. 43. 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
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