4 creating the service product.ppt

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 1
Chapter 4
Creating the
Service Product

Key Steps in Service Planning:
Matching Opportunities to Resources
 Must relate marketing opportunities to firm’s resources
(physical, financial, technological, human)
 Identify, evaluate firm’s marketing assets
 Customer portfolio/lifetime value (customer equity)
 Market knowledge
 Marketing implementation skill
 Product line
 Competitive positioning strategies
 Brand reputation (brand equity)
 Identify, evaluate firm’s operating assets
 Physical facilities, equipment
 Technology and systems (especially IT)
 Human resources (numbers, skills, productivity)
 Leverage through alliances and partnerships
 Potential for customer self service
 Cost structure

Operating Assets
(Facilities/Equipment, IT Systems,
People, Op. Skills, Cost Structure)
Service Design Involves Matching Marketing
Concept with Operations Concept (Fig. 4.1)
Corporate Objectives
and Resources
Service Delivery
Process
Marketing Assets
(Customer Base, Mkt. Knowledge,
Implementation Skills, Brand Reput.)
Service Marketing Concept
•Benefits to customer from core/
supplementary elements, style,
service level, accessibility
•User costs/outlays incurred
•Price/other monetary costs
•Time
•Mental and physical effort
•Neg. sensory experiences
Service Operations Concept
•Nature of processes
•Geographic scope of ops
•Scheduling
•Facilities design/layout
•HR (numbers, skills)
•Leverage (partners, self-service)
•Task allocation: front/backstage
staff; customers as co-producers

Planning and creating services
 The task begins at the corporate level with a statement of objectives.
 This statement leads into a detailed market and competitive analysis, addressing each of
the markets in which the firm is involved.
 Paralleling this step is a resource allocation analysis, requiring definition and appraisal of
the firm’s resources and how they are being allocated, as well as identification of
additional resources that might be obtained.
 Each of this, leads to a statement of assets: marketing and operating assets.
 The marketing assets statement reveals certain marketing opportunities, which then have
to be matched against an operating assets statement.
 From a marketing perspective, next step in transforming an opportunity into reality
involves creating a service marketing concept to clarify the benefits offered to the
customers and the costs they will incur in return.
 A parallel step is to establish a service operations concept, which stipulates the nature of
the processes involved and how and when the various types of operating assets should be
deployed to perform specific tasks.
 Finally, the operations concept clarifies which tasks and resources will be assigned to
front-stage and which to backstage operations.

Understanding the
Components of the
Augmented Service Product

Shostack’s Molecular Model of a Total Market
Entity - Passenger Airline Service (Fig. 4-2)
Distribution
Price
Marketing Positioning
(Weighted toward evidence) Source: Shostack
KEY
Tangible elements
Intangible elements
Service
frequency
Vehicle
Transport
Pre- and
post-flight
service
Food
and
drink
In-flight
service

Core Products and Supplementary Services
 Most firms offer customers a package of benefits:
core product (a good or a service)
supplementary services that add value to the core
 In mature industries, core products often become
commodities
 Supplementary services help to differentiate core products
and create competitive advantage by:
facilitating use of the core service
enhancing the value and appeal of the core

Core and Supplementary Product Design:
What Do We Offer and How Do We Create and Deliver It?
Core
Scheduling Process
Service
Level
Customer
Role
Supplementary
services offered
and how created
and delivered
Delivery Concept
For Core Product

What Should Be the Core and Supplementary
Elements of Our Service Product?
 How is our core product defined and what supplementary
elements currently augment this core?
 What product benefits create the most value for customers?
 Is our service package differentiated from the competition in
ways that are meaningful to target customers?
 What are current levels of service on the core product and
each of the supplementary elements?
 Can we charge more for higher service levels on key
attributes (e.g., faster response, better physical amenities,
easier access, more staff, superior caliber personnel)?
 Alternatively, should we cut service levels and charge less?

Core and Supplementary Services in a Luxury Hotel
(Offering Guests Much More than a Cheap Motel!)
Reservation
Valet
Parking
Reception
Baggage
Service
Cocktail
Bar
Restaurant
Entertainment/
Sports / Exercise
T
elephone
Wake-up
Call
Room
Service
Business
Center
Cashier
A Bed for the
Night in an
Elegant Private
Room with a
Bathroom

What Happens, When, and in What Sequence?
The Time Dimension in the Augmented Service Product
Pre
Visit
Reservation
USE GUESTROOM OVERNIGHT
Parking Get car
Check in
Porter
USE ROOM
Meal
Pay TV Room service
Phone
Check out
Time Frame of an Overnight Hotel Stay
(real-time service use)

The Flower of Service:
Categorizing Supplementary Services (Fig. 4-5)
Core
Information
Consultation
Order-Taking
Hospitality
Payment
Billing
Exceptions
Safekeeping
Facilitating elements
Enhancing elements
KEY:

Facilitating Services - Information
(Table 4.1)
Core
Customers often require
information about how to
obtain and use a product or
service. They may also
need reminders and
documentation

Facilitating Services - Order-Taking
(Table 4.2)
Many goods and services
must be ordered or reserved
in advance. Customers need
to know what is available and
may want to secure
commitment to delivery
Core

Facilitating Services - Billing
(Table 4.3)
“How much do I owe you?”
Customers deserve clear,
accurate and intelligible
bills and statements
Core

Facilitating Services - Payment
(Table 4.4)
Customers may pay faster
and more cheerfully if you
make transactions simple
and convenient for them
Core

Enhancing Services - Consultation
(Table 4.5)
Value can be added to
goods and services by
offering advice and
consultation tailored to
each customer’s
needs and situation
Core

Enhancing Services - Hospitality
(Table 4.6)
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 there!)
Core

Enhancing Services - Safekeeping
(Table 4.7)
Customers prefer not to
worry about looking after
the personal possessions
that they bring with them
to a service site.
They may also want delivery
and after-sales services for
goods that they purchase
or rent
Core

Enhancing Services - Exceptions
(Table 4.8)
Customers appreciate some
flexibility in a business
when they make special
requests. They expect it
when not everything goes
according to plan
Core

New Service
Development

New Service Development:
A Hierarchy of New Service Categories
 Major service innovations--new core products for previously
undefined markets
 Major process innovations--using new processes to
deliver existing products and offer extra benefits
 Product line extensions--additions to current product lines
 Process line extensions--alternative delivery procedures
 Supplementary service innovations--adding new or
improved facilitating or enhancing elements
 Style changes--visible changes in service design or scripts

New Service Development:
Physical Goods as Source of Service Ideas
 Customers can rent goods—use and return for a fee—
instead of purchasing them
 Customers can hire personnel to operate their own or
rented equipment
 Any new durable product may create need for after-sales
services (possession processing)
 Shipping
 Installation
 Problem-solving and consulting advice
 Cleaning
 Maintenance
 Repair
 Upgrading
 Disposal

Creating Services as Substitutes for
Owning and/or Using Goods (Fig. 4-7)
Perform the
Work Oneself
Hire Someone
to Do the Work
Own a Physical Good Rent the Use
of a Physical Good
•• Hire a taxi or limousine
•• Send work to secretarial service
• Rent car and drive it
• Rent word processor and type
• Hire chauffeur to drive car
• Hire typist to use word processor
• Drive own car
• Type on own word processor

Service Development through Delivery Options:
Alternative Meal Service Formats (Fig. 4-8)
Home
Delivery
Order food,
give address
Driver rings
doorbell
Pay driver,
take food Eat
Telephone
Restaurant
Drive-In
Restaurant
(Take Out)
See sign Order via
microphone
Get meal at
pickup, pay
Drive away,
eat later
Stop car at
order point
Fast-Food
Restaurant
(Eat In)
See sign Park and
enter
Order meal,
and pay
Pick up
meal
Find table
and eat
Clear table
and leave
Home
Catering
Arrange to
meet caterer
Plan meal,
pay deposit
Food and
staff arrive
Meal is
prepared
and served
Eat
Staff cleans
up; pay

Elements of a Hotel Offering:
Trading off Room Price vs. Features/Services
 External building design
and features
 Room features
 Food-related services
 Lounge facilities
 Services (e.g., reception)
 Leisure facilities
 Security—people/systems

Success Factors in New Service Development
 Market synergy
 Good fit between new product and firm’s image/resources
 Advantage vs. 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

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