Creation of Development of
Service Products
• Creating a service concept is the initial step in
building an overall service model. This task
focuses our attention on the first of the 8Ps,
Product Elements. All service organizations
face choices concerning the types of products
to offer and how to deliver them to
customers.
Planning and Creating
Services
• Augmenting the Core Product
– Services are usually defined with
reference to a particular industry.
For example, transportation or
healthcare. However, delivery of
this core product is typically
accompanied by a variety of other
service-related activities that we
refer to collectively as
supplementary services, which
facilitate use of the core product
and add value and differentiation to
the customer’s overall experience.
Vehicle
In-flight
service
Service
frequency
TRANSPORT
I
ntangible
T
angible
PostFlight
Service
Food
and
drinks
PreFlight
Service
Marketing Positioning
Designing a Service
Concept
• Core Product
– This is the central component that
supplies the principal, problemsolving benefits customers seek. For
instance, transport solves the need
to move a person or a physical object
from one location to another; or
repair services restore a damaged or
malfuntioning machine to good
working order.
Designing a Service
Concept
• Supplementary Services
– These augment the core product, both
facilitating its use and enhancing its
value and appeal. The extent and level
of supplementary services often play a
role in differentiating and positioning
the core product against competing
services. Adding more supplementary
elements or increasing the level of
performance should be done in ways
that enhance the perceived value of the
core product for prospective customers
and enable the service provider to
charge higher price
Designing a Service
Concept
• Delivery Processes
– The 3rd component concerns the
processes used to deliver both the core
product and each of the supplementary
services. The design of the service
offering must address the following
issues:
• How the different service components are
delivered to the customer
• The nature of the customer’s role in those
processes
• How long delivery lasts
• The prescribed level and style of service to
be offered.
CORE
O
B
I
S
The Flower of Service: Core Product Surrounded by a
Cluster of Supplementary Services
The Flower of Service
• Supplementary services play one
of two roles. Facilitating
supplementary services are either
required for service delivery or
aid in the use of the core product.
Enhancing supplementary services
add extra value for customers.
There are potentially dozens of
different supplementary services,
but almost all of them can be
classified into one of the 8
clusters.
The Flower of Service
• Facilitating Services
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Information
Order-taking
Billing
Payment
• Enhancing Services
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Consultation
Hospitality
Safekeeping
Exceptions
Information
• To obtain full value from any good or service,
customers need relevant information. Thus,
companies should make sure the information
they provide is both timely and accurate,
because inaccurate information can annoy or
cause inconvenience among customers.
Examples of Information Elements
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Directions to service site
Schedules/service hours
Prices
Instructions on using core product/supplementary services
Reminders
Warnings conditions of sale/service
Notification of changes
Documentation
Confirmation of reservations
Summaries of account activity
Receipts and tickets
Order-Taking
• Once customers are ready to buy, a key
supplementary element comes into play –
accepting aplications, orders, and
reservations. The process of order-taking
should be polite, fast, and accurate, so that
customers do not waste time and endure
unnecessary mental or physical effort.
Examples of Order-Taking Elements
• Applications
– Membership in clubs or programs
– Subscription services (i.e. utilities)
– Prerequisite-based services (i.e. college enrollment)
• Order Entry
– On-site order fulfillment
– Mail/telephone order placement
– Email/website order placement
• Reservations and Check-In
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Seats/tables/rooms
Vehicles or equipment rental
Professional appointments
Admission to restricted facilities (i.e. museums)
Billing
• This is common to almost all services (unless
the service is provided free of charge).
Inaccurate, illegible, or incomplete bills risk
disappointing customers who may, up to that
point, have been quite satisfied with their
experience. Billing should also be timely,
because it stimulates faster payent.
Examples of Billing Elements
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Periodic statements of account activity
Invoices for individual transactions
Verbal statements of amount due
Machine display of amount due
Self-billing (computed by customer)
Payment
• In most cases, a bill requires the customer to
take action on payment. Increasingly,
customers expect ease and convenience of
payment, including credit, when they make
purchases in their own countries and while
traveling abroad. A variety of options exist
for customers to make payment.
Examples of Payment Elements
• Self-Service
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Insert card, cash, or token in machine
Electronic funds transfer
Mail a check
Enter credit card number online
• Direct to Payee or
Intermediary
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Cash handling and change giving
Check handling
Credit/charge/debit card handling
Coupon redemption
Tokens, vouchers, etc.
• Automated deduction from Financial Deposits Control and
Verification
– Automated systems (i.e. machine-readable tickets that operate entry gates)
– Human systems (i.e. toll collectors, ticket inspectors)
Consultation
• This involves a dialog to probe customer
requirements and then develop a tailored
solution. Effective consultation requires an
understanding of each customer’s current
situation, before suggesting a suitable course
of action.
Examples of Consultation Elements
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Customized advice
Personal counseling
Tutoring/training in product use
Management or technical
consulting
Hospitality
• Hospitality-related services should, ideally,
reflect pleasure at meeting new customers
and greeting old ones when they return.
• The quality of hospitality services offered by a
firm plays an important role in determining
your satisfaction (or dissatisfaction) with the
core product.
Examples of Hospitality Elements
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Greeting
Food and beverages
Toilets and washrooms
Waiting facilities and amenities
– Lounges, waiting areas, seating
– Weather protection
– Magazines, entertainment, newspapers
• Transport
• Security
Safekeeping
• When customers are visiting a service site,
they often want assistance with their personal
possessions. In fact, unless certain
safekeeping services are provided (i.e. safe
and convenient parking spaces), some
customers may not come at all.
Examples of SafekeepingElements
• Caring for Possessions
Customers Bring with Them
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Child care
Pet care
Parking facilities for vehicles
Valet parking
Coatrooms
Baggage handling
Storage space
Safe deposit boxes
Security personnel
• Caring for Goods Purchased
(for Rented) by Customers
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Packaging
Pickup
Transportation and delivery
Installation
Inspection and diagnosis
Cleaning
Refueling
Preventive maintenance
Repairs and renovation
Upgrade
Exceptions
• These involve supplementary services that fall
outside the routine of normal service delivery.
Astute businesses anticipate exceptions and
develop contingency plans and guidelines in
advance. That way, employees will not appear
helpless and surprised when customers ask for
special assistance.
Types of Exceptions
• Special Requests
• Problem Solving
• Handling of
complaints/suggestions/compliments
• Restitution
Examples of Exceptions Elements
• Special Requests in Advance of
Service Delivery
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Children’s Needs
Dietary requirements
Medical or disability needs
Religious observances
Deviations from standard
operating procedures
• Restitution
– Refunds
– Compensation in kind for
unsatisfactory goods and
services
– Free repair of defective goods
• Handling Special
Communications
– Complaints
– Compliments
– Suggestions
• Problem Solving
– Warranties and guarantees against
product malfunction
– Resolving difficulties that aris from
using the product
– Resolving difficulties caused by
accidents, service failures, and
problems with staff or other customers
– Assisting customers who have suffered
an accident or medical emergency
Planning and Branding Service
Products
• A product implies a defined and consistent
“bundle of output” and also the ability to
differentiate one bundle of output from
another.
• Providers of more intangible services also offer
a “menu” of products, representing an
assembly of carefully prescribed elements built
around the core product, and may bundle in
certain value-added supplementary services.
Planning and Branding
Service Products
• Most service organizations offer a
line of products rather than just a
single product. As a result, they
must choose among three broad
alternatives: using a single brand
to cover all products and services,
a separate stand-alone brand for
each offering, or some
combination of these two
extremes
Individual Product
Branding
Corporate Branding
“Branded House”
Sub-Brands
Endorsed Brands
House of Brands
The Spectrum of Branded Alternatives
Development of New Services
• Competitive intensity and customer
expectations are increasing in nearly all service
industries. Thus, success lies not only in
providing existing services well, but also in
creating new approaches to service. Because
the outcome and process aspects of a service
often combine to create the experience and
benefits received by customers, both aspects
must be addressed in development of new
services.
A Hierarchy of New
Service Categories
• Major service innovations – new
core products for markets that
have not been previously defined.
They usually include both new
service characteristics and radical
new processes.
– FedEx introduced overnight,
nationwide, express package delivery
in 1971.
• Major process innovations –
consist of using new processes to
deliver existing core products in
new ways with additional benefits.
– University of Phoenix delivers
undergraduate and graduate degree
programs in a nontraditional way –
online!
• Product Line Extensions – additions
to current product lines by existing
firms.
– Banks retail insurance products
• Process Line Extensions –
represent distinctive new ways of
delivering existing products, either
with the intent of offering more
convenience and a different
experience for existing customers
or of attracting customers who
find the traditional approach
unappealing.
– Barnes and Noble, the leading
bookstore chain in the US, added
internet retailing through
BarnesandNoble.com
• Supplementary Service Innovations
– take the form of adding new
facilitating or enhancing service
elements to an existing core
service, or of significantly
improving an existing
supplementary service.
– Rainforest Café is designed to keep
customers entertained with
aquariums, live parrots etc.
• Service improvements are the
most common type of innovation.
They involve modest changes in
the performance of current
products, including improvements
to either the core product or to
existing supplementary services
• Style changes – represent the
simplest type of innovation,
typically involving no changes in
either processes or performance.
– Repainting retail branches
– New uniforms for employees
– Minor changes in service scripts for
employees
Reengineering Service
Processes
• The design of service process has
implications not only for
customers but also for the cost,
speed, and productivity with which
the desired outcome is achieved.
• Reengineering involves analyzing
and redesigning processes to
achieve faster and better
performance.
Physical Goods as a Source
of New Service Ideas
• The design of service process has
implications not only for
customers but also for the cost,
speed, and productivity with which
the desired outcome is achieved.
• Reengineering involves analyzing
and redesigning processes to
achieve faster and better
performance.
Using Research to Design
New Services
• If a company is designing a new
service from scratch, how can it
figure out what features and price
will create the best value for target
customers?
• Marriott, through research filled a
gap in the market with a product
that represented the best balance
between the price customers were
prepared to pay and the physical
and service features they most
desired.