Chapter 4

Creating the Service Product

 Must relate marketing opportunities to firms resources (physical, financial, technological, human) Identify, evaluate firms marketing assets
Customer portfolio/lifetime value (customer equity) Market knowledge Marketing implementation skill Product line Competitive positioning strategies Brand reputation (brand equity) 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

Key Steps in Service Planning: Matching Opportunities to Resources

Identify, evaluate firms operating assets

Service Design Involves Matching Marketing Concept with Operations Concept (Fig. 4.1)
Corporate Objectives and Resources
Marketing Assets
(Customer Base, Mkt. Knowledge, Implementation Skills, Brand Reput.)

Operating Assets
(Facilities/Equipment, IT Systems, People, Op. Skills, Cost Structure)

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

Service Delivery Process

Understanding the Components of the Augmented Service Product

Shostacks Molecular Model of a Total Market Entity - Passenger Airline Service (Fig. 4-2)
Distribution Price Service
frequency

Vehicle

Transport

In-flight service

Pre- and post-flight service

KEY

Food and drink

Tangible elements Intangible elements

Marketing Positioning (Weighted toward evidence) Source: Shostack

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?

Supplementary services offered and how created and delivered

Delivery Concept For Core Product

Scheduling

Process

Core Service Level Customer Role

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 Cashier Business Center A Bed for the Night in an Elegant Private Room with a Bathroom Valet Parking Reception Baggage Service

Room Service Wake-up Call T elephone

Cocktail Bar
Entertainment/ Sports / Exercise

Restaurant

What Happens, When, and in What Sequence? The Time Dimension in the Augmented Service Product
Reservation Parking Check in USE ROOM Get car Check out Phone USE GUESTROOM OVERNIGHT Porter Meal Pay TV Room service

Pre Visit

Time Frame of an Overnight Hotel Stay (real-time service use)

The Flower of Service: Categorizing Supplementary Services

(Fig. 4-5)
Information Payment Billing
Core

Consultation Order-Taking

Exceptions
KEY:

Hospitality Safekeeping

Facilitating elements Enhancing elements

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)

Core

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

Facilitating Services - Billing

(Table 4.3)

Core

How much do I owe you? Customers deserve clear, accurate and intelligible bills and statements

Facilitating Services - Payment

(Table 4.4)

Core

Customers may pay faster and more cheerfully if you make transactions simple and convenient for them

Enhancing Services - Consultation

(Table 4.5)

Core

Value can be added to goods and services by offering advice and consultation tailored to each customers needs and situation

Enhancing Services - Hospitality

(Table 4.6)

Core

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!)

Enhancing Services - Safekeeping

(Table 4.7)

Core

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

Enhancing Services - Exceptions

(Table 4.8)

Core

Customers appreciate some flexibility in a business when they make special requests. They expect it when not everything goes according to plan

Branding Service Products

Service Branding: Clarifying Distinctive Service Offerings

Marriott Hotel Brands
Marriott Hotels Marriott Resorts Courtyard by Marriott Fairfield Inns Residence Inns SpringHill Suites TownePlace Suites Marriott Vacation Clubs International
Intercontinental

British Airways Brands

First Club World World Traveller Plus World Traveller

European

Club Europe Euro-Traveller

UK Domestic

Shuttle

Line: A Family of Brands at Sun Microsystems Corporate umbrella brand

Sun Microsystems

Product line brand (system support services)

Sun Spectrum Support

Sub-brands (4 levels of support service programs)

Platinum Gold Silver Bronze

Sub-branding clarifies service levels offered at different fees

Sun Spectrum Support: Sub-branding Highlights Four Service Levels

Platinum: Mission Critical On-site service 24/7, two-hour response; telephone support 24/7, onsite parts replacement; additional services available Gold: Business Critical Onsite service Mon-Fri 8am-8pm, four-hour response; telephone support 24/7; onsite parts replacement Silver: Basic Support

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

New Service Development: Physical Goods as Source of Service Ideas Customers can rent goodsuse 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

Creating Services as Substitutes for

Owning and/or Using Goods
Own a Physical Good

(Fig. 4-7)

Rent the Use of a Physical Good

Rent car and drive it
Rent word processor and type

Perform the Work Oneself

Hire Someone to Do the Work

Drive own car Type on own word processor

Hire chauffeur to drive car Hire typist to use word processor

Hire a taxi or limousine Send work to secretarial service

Service Development through Delivery Options: Alternative Meal Service Formats (Fig. 4-8)
Fast-Food Restaurant (Eat In) Drive-In Restaurant (Take Out) Home Delivery
See sign Park and enter Order meal, and pay Pick up meal Find table and eat Clear table and leave

See sign

Stop car at order point

Order via microphone

Get meal at pickup, pay

Drive away, eat later

Telephone Restaurant

Order food, give address

Driver rings doorbell

Pay driver, take food

Eat

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)

Success Factors in New Service Development

Market synergy
Good fit between new product and firms 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