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MBA 9061
Services Marketing
Service development and design:
Challenges of service design, types of
new services, core and
supplementary elements
Course Instructor: Sneha Sharma (PhD*, MBA, Dip T & D)
MBA 906
Service Development and design
For a good service idea to succeed, it is important to focus on
development, design and specification of service.
MBA 906
Service Design
Begins with a choice of service strategy, which
determines the nature and focus of the service,
and the target market
– Key issues in service design
• Degree of variation in service requirements
• Degree of customer contact and involvement
MBA 906
Service Design Definitions
• Something that is done to, or for, a customer
Service
• The facilities, processes, and skills needed to provide a
service
Service delivery system
• The combination of goods and services provided to a
customer
Product bundle
MBA 906
CHARACTERISTICS TO BE STUDIED IN
DETAIL
Service
characteristics:
• meeting the
need of the
customer
• advantage over
the competitors
in the market.
• technological
edge
Strategy
characteristics:
• dedicated
workforce who
believe in the
new service
• dedicated R&D
focus on the
new service
initiative.
Process
characteristics:
• marketing
• predevelopment
• technological
and launch
proficiencies
Marketplace
characteristics:
• relates to the
market potential
of the new
service
MBA 906
Planning and Creating Services
6
Design a Service
Concept
Document
Delivery
Sequence over
Time
Flowchart
Service Delivery
MBA 906
Step 1- Service Concept
7
The service concept is represented by:
-A core product
-core products often become commodities
-Accompanied by supplementary services
-Supplementary services help to differentiate core
products and create competitive advantage by:
-Facilitating use of core product (a service or a good)
-Enhancing the value and appeal of the core product
MBA 906
Designing a Service Concept
8
Core Product
• Central
component
that supplies
the principal,
problem-
solving
benefits
customers seek
Supplementary
Services
• Augment the
core product,
facilitating its
use and
enhancing its
value and
appeal
Delivery
Processes
• Used to deliver
both the core
product and
each of the
supplementary
services
MBA 906
Core and Supplementary Product Design
Scheduling
Nature of
Process
Service
Level
Customer
Role
Supplementary
services offered
and delivered
Delivery Concept
for Core Product
MBA 906
Core and Supplementary Services at Luxury Hotel
Reservation
Valet
Parking
Reception
Baggage
Service
Cocktail
Bar
Restaurant
Entertainment/
Sports/
Exercise
Internet
Wake-up
Call
Room
Service
Business
Center
Cashier
A Bed for the
Night in an
Elegant Private
Room with a
Bathroom
MBA 906
Step 2: Documenting Delivery Sequence
Over Time
11
Question: Do customers’ expectations change during service delivery in
light of perceived quality of each sequential encounter?
Must address sequence in which customers will use each core and
supplementary service
Determine length of time for each step
Information should reflect good understanding of customers,
especially their:
• Needs
• Habits
• Expectations
MBA 906
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
MBA 906
Step 3: Flowcharting Service Delivery
• Offers way to understand totality of customer’s service experience
• Useful for distinguishing between core product itself and service elements
that supplement core
– Restaurants: Food and beverage (core)
– Reservations (supplementary services)
• Shows how nature of customer involvement with service organizations
varies by type of service:
– People processing
– Possession processing
– Mental Stimulus processing
– Information processing
MBA 906
Simple Flowchart for Delivery of a
People-Processing Service
Park Car Check In
Spend
Night in
Room
Breakfast Check
Out
Breakfast
Prepared
Maid
Makes up
Room
People Processing – Stay at Motel
MBA 906
Simple Flowchart for Delivery of a
Possession-Processing Service
Possession Processing – Repair a DVD Player
Travel to
Store
Technician Examines
Player, Diagnoses
Problem
Leave
Store
Return, Pick up
Player and Pay
Technician Repairs Player
(Later) Play
DVDs at Home
MBA 906
Simple Flowchart for Delivery of
Mental Stimulus-Processing Service
Mental Stimulus Processing – Weather Forecast
Turn on TV, Select
Channel
View Presentation of
Weather Forecast
TV Weatherperson
Prepares Local
Forecast
Confirm Plans for
Picnic
Meteorologists Input Data
to Models and Creates
Forecast from Output
Collect
Weather
Data
MBA 906
Simple Flowchart for Delivery of An
Information-Processing Service
Information Processing – Health Insurance
Learn about
Options
Select Plan,
Complete Forms Pay
Customer Information
Entered in Database
Printed Policy
Documents
Arrive
Insurance
Coverage Begins
University and Insurance
Company Agree on Terms of
Coverage
MBA 906
The Flower of Service
Core
Information
Consultation
Order Taking
Hospitality
Payment
Billing
Exceptions
Safekeeping
Facilitating elements
Enhancing elements
KEY:
MBA 906
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
MBA 906
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
MBA 906
The Flower of Service:
Facilitating Services—Billing
Core
“How much do I owe you?”
Bills should be clear,
Accurate, and understandable.
Examples of elements:
 Periodic statements of
account activity
 Machine display of amount
due
MBA 906
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
MBA 906
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
MBA 906
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
MBA 906
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
MBA 906
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
 Reimbursement
MBA 906
Performance Priorities in Service Design
Treatment of the customer
Speed and convenience of service delivery
Price
Variety
Quality of the tangible goods
Unique skills that constitute the service offering
MBA 906
Phases in Service Design
Conceptualize
Identify service package components
Determine performance specifications
Translate performance specifications into design specifications
Translate design specifications into delivery specifications
MBA 906
The Service Design Process
Performance Specifications
Service
Delivery Specifications
Physical
items
Sensual
benefits
Psychological
benefits
Design Specifications Service
Provider
Customer
Customer
requirements
Customer
expectations
Activities Facility
Provider
skills
Cost and time
estimates
Schedule Deliverables Location
Service Concept Service Package
Desired service
experience
Targeted
customer
MBA 906
Service Systems
 Service systems range from those with little or no
customer contact to very high degree of customer
contact such as:
– Insulated technical core (software development)
– Production line (automatic car wash)
– Personalized service (hair cut, medical service)
– Consumer participation (diet program)
– Self service (supermarket)
MBA 906
Three Contrasting Service Designs
The production line
approach
• ex. McDonald’s
The self-service
approach
• ex. automatic
teller machines
The personal
attention approach
• ex. Ritz-Carlton
Hotel Company
MBA 906
Characteristics of a Well-Designed Service System
Each element of the service system is consistent with the strategic and
operating focus of the firm
It is user-friendly
It is robust and easy to sustain
It is structured so that consistent performance by its people and systems is
easily maintained
It provides effective links between the back office and the front office so
that nothing falls between the cracks
It manages the evidence of service quality in such a way that customers see
the value of the service provided
It is cost-effective
It ensures reliability and high quality
MBA 906
Challenges of Service Design
Variable requirements Difficult to describe
High customer contact
Service – customer
encounter
MBA 906
New Service
Development
MBA 906
NEW SERVICE DEVELOPMENT
New services should be developed in a
systematic step by step framework, which
must be objective, not subjective.
must be precise, not ambiguous.
must be based on facts, not on opinions.
must be methodological, not philosophical
MBA 906
NEW SERVICE DEVELOPMENT PROCESS
 Business Strategy Development or Review
 New Service Strategy Development
 Idea Generation
 Concept Development and Evaluation
 Business Analysis
 Service Development and Testing
 Postintroduction Evaluation
 Commercialization
 Market Testing
Screen ideas against new service strategy
Test concept with customers and employees
Test for profitability and feasibility
Conduct service prototype test
Test service and other marketing-mix elements
Front End
Planning
Implementation
MBA 906
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 with added benefits
Product-line extensions
•Additions to current product lines
Process-line extensions
•Alternative delivery procedures
Supplementary service innovations
•Addition of new or improved facilitating or enhancing elements
Service improvements
•Modest changes in the performance of current products
Style changes
•Visible changes in service design or scripts
MBA 906
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
MBA 906
Achieving Success in developing
New Services
• 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
MBA 906
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 inter-functional
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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Service development and design

  • 1. MBA 9061 Services Marketing Service development and design: Challenges of service design, types of new services, core and supplementary elements Course Instructor: Sneha Sharma (PhD*, MBA, Dip T & D)
  • 2. MBA 906 Service Development and design For a good service idea to succeed, it is important to focus on development, design and specification of service.
  • 3. MBA 906 Service Design Begins with a choice of service strategy, which determines the nature and focus of the service, and the target market – Key issues in service design • Degree of variation in service requirements • Degree of customer contact and involvement
  • 4. MBA 906 Service Design Definitions • Something that is done to, or for, a customer Service • The facilities, processes, and skills needed to provide a service Service delivery system • The combination of goods and services provided to a customer Product bundle
  • 5. MBA 906 CHARACTERISTICS TO BE STUDIED IN DETAIL Service characteristics: • meeting the need of the customer • advantage over the competitors in the market. • technological edge Strategy characteristics: • dedicated workforce who believe in the new service • dedicated R&D focus on the new service initiative. Process characteristics: • marketing • predevelopment • technological and launch proficiencies Marketplace characteristics: • relates to the market potential of the new service
  • 6. MBA 906 Planning and Creating Services 6 Design a Service Concept Document Delivery Sequence over Time Flowchart Service Delivery
  • 7. MBA 906 Step 1- Service Concept 7 The service concept is represented by: -A core product -core products often become commodities -Accompanied by supplementary services -Supplementary services help to differentiate core products and create competitive advantage by: -Facilitating use of core product (a service or a good) -Enhancing the value and appeal of the core product
  • 8. MBA 906 Designing a Service Concept 8 Core Product • Central component that supplies the principal, problem- solving benefits customers seek Supplementary Services • Augment the core product, facilitating its use and enhancing its value and appeal Delivery Processes • Used to deliver both the core product and each of the supplementary services
  • 9. MBA 906 Core and Supplementary Product Design Scheduling Nature of Process Service Level Customer Role Supplementary services offered and delivered Delivery Concept for Core Product
  • 10. MBA 906 Core and Supplementary Services at Luxury Hotel Reservation Valet Parking Reception Baggage Service Cocktail Bar Restaurant Entertainment/ Sports/ Exercise Internet Wake-up Call Room Service Business Center Cashier A Bed for the Night in an Elegant Private Room with a Bathroom
  • 11. MBA 906 Step 2: Documenting Delivery Sequence Over Time 11 Question: Do customers’ expectations change during service delivery in light of perceived quality of each sequential encounter? Must address sequence in which customers will use each core and supplementary service Determine length of time for each step Information should reflect good understanding of customers, especially their: • Needs • Habits • Expectations
  • 12. MBA 906 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. MBA 906 Step 3: Flowcharting Service Delivery • Offers way to understand totality of customer’s service experience • Useful for distinguishing between core product itself and service elements that supplement core – Restaurants: Food and beverage (core) – Reservations (supplementary services) • Shows how nature of customer involvement with service organizations varies by type of service: – People processing – Possession processing – Mental Stimulus processing – Information processing
  • 14. MBA 906 Simple Flowchart for Delivery of a People-Processing Service Park Car Check In Spend Night in Room Breakfast Check Out Breakfast Prepared Maid Makes up Room People Processing – Stay at Motel
  • 15. MBA 906 Simple Flowchart for Delivery of a Possession-Processing Service Possession Processing – Repair a DVD Player Travel to Store Technician Examines Player, Diagnoses Problem Leave Store Return, Pick up Player and Pay Technician Repairs Player (Later) Play DVDs at Home
  • 16. MBA 906 Simple Flowchart for Delivery of Mental Stimulus-Processing Service Mental Stimulus Processing – Weather Forecast Turn on TV, Select Channel View Presentation of Weather Forecast TV Weatherperson Prepares Local Forecast Confirm Plans for Picnic Meteorologists Input Data to Models and Creates Forecast from Output Collect Weather Data
  • 17. MBA 906 Simple Flowchart for Delivery of An Information-Processing Service Information Processing – Health Insurance Learn about Options Select Plan, Complete Forms Pay Customer Information Entered in Database Printed Policy Documents Arrive Insurance Coverage Begins University and Insurance Company Agree on Terms of Coverage
  • 18. MBA 906 The Flower of Service Core Information Consultation Order Taking Hospitality Payment Billing Exceptions Safekeeping Facilitating elements Enhancing elements KEY:
  • 19. MBA 906 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
  • 20. MBA 906 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
  • 21. MBA 906 The Flower of Service: Facilitating Services—Billing Core “How much do I owe you?” Bills should be clear, Accurate, and understandable. Examples of elements:  Periodic statements of account activity  Machine display of amount due
  • 22. MBA 906 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
  • 23. MBA 906 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
  • 24. MBA 906 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
  • 25. MBA 906 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
  • 26. MBA 906 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  Reimbursement
  • 27. MBA 906 Performance Priorities in Service Design Treatment of the customer Speed and convenience of service delivery Price Variety Quality of the tangible goods Unique skills that constitute the service offering
  • 28. MBA 906 Phases in Service Design Conceptualize Identify service package components Determine performance specifications Translate performance specifications into design specifications Translate design specifications into delivery specifications
  • 29. MBA 906 The Service Design Process Performance Specifications Service Delivery Specifications Physical items Sensual benefits Psychological benefits Design Specifications Service Provider Customer Customer requirements Customer expectations Activities Facility Provider skills Cost and time estimates Schedule Deliverables Location Service Concept Service Package Desired service experience Targeted customer
  • 30. MBA 906 Service Systems  Service systems range from those with little or no customer contact to very high degree of customer contact such as: – Insulated technical core (software development) – Production line (automatic car wash) – Personalized service (hair cut, medical service) – Consumer participation (diet program) – Self service (supermarket)
  • 31. MBA 906 Three Contrasting Service Designs The production line approach • ex. McDonald’s The self-service approach • ex. automatic teller machines The personal attention approach • ex. Ritz-Carlton Hotel Company
  • 32. MBA 906 Characteristics of a Well-Designed Service System Each element of the service system is consistent with the strategic and operating focus of the firm It is user-friendly It is robust and easy to sustain It is structured so that consistent performance by its people and systems is easily maintained It provides effective links between the back office and the front office so that nothing falls between the cracks It manages the evidence of service quality in such a way that customers see the value of the service provided It is cost-effective It ensures reliability and high quality
  • 33. MBA 906 Challenges of Service Design Variable requirements Difficult to describe High customer contact Service – customer encounter
  • 35. MBA 906 NEW SERVICE DEVELOPMENT New services should be developed in a systematic step by step framework, which must be objective, not subjective. must be precise, not ambiguous. must be based on facts, not on opinions. must be methodological, not philosophical
  • 36. MBA 906 NEW SERVICE DEVELOPMENT PROCESS  Business Strategy Development or Review  New Service Strategy Development  Idea Generation  Concept Development and Evaluation  Business Analysis  Service Development and Testing  Postintroduction Evaluation  Commercialization  Market Testing Screen ideas against new service strategy Test concept with customers and employees Test for profitability and feasibility Conduct service prototype test Test service and other marketing-mix elements Front End Planning Implementation
  • 37. MBA 906 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 with added benefits Product-line extensions •Additions to current product lines Process-line extensions •Alternative delivery procedures Supplementary service innovations •Addition of new or improved facilitating or enhancing elements Service improvements •Modest changes in the performance of current products Style changes •Visible changes in service design or scripts
  • 38. MBA 906 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. MBA 906 Achieving Success in developing New Services • 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
  • 40. MBA 906 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 inter-functional 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