Chapter 3 Developing Service Concepts Core and Supplementary

Chapter 3 Developing Service Concepts: Core and Supplementary Elements Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 1

Learning Objectives – Chapter 3 § In depth understanding of service products § Determine the value of flowcharting service usage § Explore the use of supplementary services and how they add customer value § The use of branding in services § An approach for new service design Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 2

Planning and Creating Services Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 3

Planning and Creating Services § A service product comprises all elements of service performance, both tangible and intangible, that create value for customers § The service concept is represented by: Ø A core product Ø Accompanied by supplementary services – facilitate and enhance use of the core product and add value and differentiation Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 4

Core Products and Supplementary Services § In mature industries, core products often become commodities § Supplementary services help to differentiate core products and create competitive advantage by: Ø Facilitating use of core product (a service or a good) Ø Enhancing the value and appeal of the core product Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 5

Designing a Service Concept § Core Product Ø Central component that supplies the principal, problem-solving benefits customers seek § Supplementary Services Ø Augment the core product, facilitating its use and enhancing its value and appeal § Delivery Processes Ø Used to deliver both the core product and each of the supplementary services Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 6

Core and Supplementary Services at Luxury Hotel (Offering Much More than Cheap Motel!) Reservation Valet Parking Cashier Business Centre Room Service Wake-up Call Internet Copyright © 2008 Pearson Education Canada Reception A Bed for the Night in an Elegant Private Room with a Bathroom Baggage Service Cocktail Bar Entertainment/ Restaurant Sports/ Exercise Services Marketing, Canadian Edition Chapter 3 - 7

Flowcharting Service Delivery Helps to Clarify Product Elements § Helps management visualize the customer’s total service experience § Useful for distinguishing between core product itself and service elements that supplement core Ø Restaurants: Food and beverage (core) Ø Reservations (supplementary services) § Nature of customer involvement with service organizations varies by type of service: Ø Ø People processing Possession processing Mental Stimulus processing Information processing Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 8

Simple Flowchart for Delivery of a People-Processing Service (Fig 3. 4) People Processing – Stay at Motel Park Car Check In Maid Makes up Room Copyright © 2008 Pearson Education Canada Spend Night in Room Breakfast Check Out Breakfast Prepared Services Marketing, Canadian Edition Chapter 3 - 9

The Flower of Service (Fig 3. 6) Information Payment Billing Consultation Core Exceptions KEY: Order Taking Hospitality Safekeeping Facilitating elements Enhancing elements Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 10

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: Ø Which supplementary services must be offered Ø 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 Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 11

The Flower of Service: Facilitating Services—Information Customers often require information about how to obtain and use a product or service. Core Copyright © 2008 Pearson Education Canada Examples of elements: § Directions to service site § Schedule/service hours § Prices § Conditions of sale § Usage instructions Services Marketing, Canadian Edition Chapter 3 - 12

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 Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 13

The Flower of Service: Facilitating Services—Billing “How much do I owe you? ” Bills should be clear, Accurate, and intelligible. Core Examples of elements: § Periodic statements of account activity § Machine display of amount due Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 14

The Flower of Service: Facilitating Services—Payment Customers may pay faster and more cheerfully if you make transactions simple and convenient for them. Core Examples of elements: § Self service payment § Direct to payee or intermediary § Automatic deduction Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 15

The Flower of Service: Enhancing Services—Consultation Core 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 Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 16

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! Core Examples of elements: § Greeting § Waiting facilities and amenities § Food and beverages § Toilets and washrooms § Security Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 17

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. Core Examples of elements: § Looking after possessions customers bring with them § Caring for goods purchased (or rented) by customers Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 18

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. Core Examples of elements: § Special requests in advance § Complaints or compliments § Problem solving § Restitution Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 19

Managerial Implications § To develop product policy and pricing strategy, managers need to determine: Ø 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 Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 20

Planning and Branding Service Products Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 21

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: Ø Branded House – brand name to multiple offerings in unrelated fields e. g. Virgin Group Ø Sub Brands – master brand is primary frame of reference but product has a distinctive name e. g. Singapore Airlines Raffles Class Ø Endorsed Brands – Product brand dominates the corporate name Ø e. g. hotels Ø House of Brands – corporation with a number of products, each promoted under its own brand name e. g. Proctor & Gamble Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 22

Developing New Services Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 23

A Hierarchy of New Service Categories (1) Range from major innovations to simple style changes: 1. Major service innovations Ø New core products for previously undefined markets 2. Major process innovations Ø Using new processes to deliver existing products with added benefits 3. Product-line extensions Ø Additions to current product lines 4. Process-line extensions Ø Alternative delivery procedures Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 24

A Hierarchy of New Service Categories (2) 5. Supplementary service innovations Ø Addition of new or improved facilitating or enhancing elements 6. Service improvements Ø Modest changes in the performance of current products 7. Style changes Ø Visible changes in service design or scripts Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 25

Reengineering Service Processes § Reengineering involves analyzing and redesigning processes to achieve faster and better performance Ø 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 Ø Add/eliminate supplementary services Ø Resequence delivery of service elements Ø Offer self-service options Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 26

Services as Substitutes for Goods Ownership and Task Performance (Fig 3. 12) Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 27

Summary – Chapter 3 § The service concept consists of the core product, the supplementary services and the delivery processes § Flowcharting differentiates the core and supplementary services providing a total view of the customer’s experience § The 8 petals of the Flower of Service shows how supplementary services can enhance and facilitate § Branding provides a mental picture of the value proposition § There are 7 different categories of new service design ranging from major innovations to style changes Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 3 - 28