Chapter 8 Creating the Service Product Slide

Chapter 8 Creating the Service Product Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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 Ø Customer portfolio/lifetime value (customer equity) Ø Market knowledge Ø Marketing implementation skill Ø Product line Ø Competitive positioning strategies Ø Brand reputation (brand equity) § Identify, evaluate firm’s operating assets Ø Physical facilities, equipment Ø Technology and systems (especially IT) Ø Human resources (numbers, skills, productivity) Ø Leverage through alliances and partnerships Ø Potential for customer self service Ø Cost structure Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

Service Design Involves Matching Marketing Concept with Operations Concept (Fig. 4. 1) Corporate Objectives and Resources Marketing Assets Operating Assets (Customer Base, Mkt. Knowledge, Implementation Skills, Brand Reput. ) (Facilities/Equipment, IT Systems, People, Op. Skills, Cost Structure) Service Marketing Concept Service Operations Concept • Benefits to customer from core/ supplementary elements, style, service level, accessibility • 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 • User costs/outlays incurred • Price/other monetary costs • Time • Mental and physical effort • Neg. sensory experiences Service Delivery Process Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

Understanding the Components of the Augmented Service Product Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

Shostack’s Molecular Model of a Total Market Entity - Passenger Airline Service (Fig. 4 -2) Distribution Price Vehicle Service frequency Transport Pre- and post-flight service In-flight service Food and drink KEY Tangible elements Intangible elements Marketing Positioning (Weighted toward evidence) Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Source: Shostack

Core Products and Supplementary Services § Most firms offer customers a package of benefits: Ø core product (a good or a service) Ø 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: Ø facilitating use of the core service Ø enhancing the value and appeal of the core Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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 Slide © 2004 by Christopher Lovelock and Jochen Wirtz Customer Role Services Marketing 5/E

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? Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

Core and Supplementary Services in a Luxury Hotel (Offering Guests Much More than a Cheap Motel!) Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

What Happens, When, and in What Sequence? The Time Dimension in the Augmented Service Product Reservation Parking Get car Check in USE ROOM Check out Phone USE GUESTROOM OVERNIGHT Porter Meal Pre Visit Pay TV Room service Time Frame of an Overnight Hotel Stay (real-time service use) Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

The Flower of Service: Categorizing Supplementary Services (Fig. 4 -5) Information Payment Consultation Core Billing Exceptions KEY: Facilitating elements Enhancing elements Order-Taking Hospitality Safekeeping Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

Facilitating Services - Information (Table 4. 1) Core Slide © 2004 by Christopher Lovelock and Jochen Wirtz Customers often require information about how to obtain and use a product or service. They may also need reminders and documentation Services Marketing 5/E

Facilitating Services - Order-Taking (Table 4. 2) Core Slide © 2004 by Christopher Lovelock and Jochen Wirtz 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 Services Marketing 5/E

Facilitating Services - Billing (Table 4. 3) Core Slide © 2004 by Christopher Lovelock and Jochen Wirtz “How much do I owe you? ” Customers deserve clear, accurate and intelligible bills and statements Services Marketing 5/E

Facilitating Services - Payment (Table 4. 4) Core Slide © 2004 by Christopher Lovelock and Jochen Wirtz Customers may pay faster and more cheerfully if you make transactions simple and convenient for them Services Marketing 5/E

Enhancing Services - Consultation (Table 4. 5) Core Slide © 2004 by Christopher Lovelock and Jochen Wirtz Value can be added to goods and services by offering advice and consultation tailored to each customer’s needs and situation Services Marketing 5/E

Enhancing Services - Hospitality (Table 4. 6) Core Slide © 2004 by Christopher Lovelock and Jochen Wirtz 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!) Services Marketing 5/E

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 Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

Enhancing Services - Exceptions (Table 4. 8) Core Slide © 2004 by Christopher Lovelock and Jochen Wirtz Customers appreciate some flexibility in a business when they make special requests. They expect it when not everything goes according to plan Services Marketing 5/E

Branding Service Products Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

Service Branding: Clarifying Distinctive Service Offerings § Marriott Hotel Brands Ø Marriott Hotels Ø Marriott Resorts Ø Courtyard by Marriott Ø Fairfield Inns Ø Residence Inns Ø Spring. Hill Suites Ø Towne. Place Suites Ø Marriott Vacation Clubs International Slide © 2004 by Christopher Lovelock and Jochen Wirtz § British Airways Brands Intercontinental Ø First Ø Club World Ø World Traveller European Ø Club Europe Ø Euro-Traveller UK Domestic Ø Shuttle Services Marketing 5/E Plus

Branding a High-Tech, B 2 B Product Line: A Family of Brands at Sun Microsystems § Corporate umbrella brand Ø Sun Microsystems § Product line brand (system support services) Ø Sun Spectrum Support § Sub-brands (4 levels of support service programs) » » Platinum Gold Silver Bronze Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

Sun Spectrum Support: Sub-branding Highlights Four Service Levels Sub-branding clarifies service levels offered at different fees Ø Platinum: “Mission Critical” On-site service 24/7, two-hour response; telephone support 24/7, onsite parts replacement; additional services available Ø Gold: “Business Critical” Onsite service Mon-Fri 8 am-8 pm, four-hour response; telephone support 24/7; onsite parts replacement Ø Silver: “Basic Support” Onsite service Mon-Fri 8 am-5 pm, four-hour response; telephone support Mon-Fri 8 am-8 pm; onsite parts replacement Ø Bronze: “Self Support” Phone support Mon-Fri 8 am-5 pm; parts replacement by courier Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

New Service Development Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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 Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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) Ø Shipping Ø Installation Ø Problem-solving and consulting advice Ø Cleaning Ø Maintenance Ø Repair Ø Upgrading Ø Disposal Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

Creating Services as Substitutes for Owning and/or Using Goods (Fig. 4 -7) Own a Physical Good Perform the Work Oneself Hire Someone to Do the Work • Drive • Type • Hire Rent the Use of a Physical Good • Rent car and drive it own car on own word processor • Rent word processor and type chauffeur to drive car • • Hire a taxi or limousine typist to use word processor • • Send work to secretarial service Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

Service Development through Delivery Options: Alternative Meal Service Formats (Fig. 4 -8) Fast-Food Restaurant (Eat In) Drive-In Restaurant (Take Out) See sign Order meal, and pay Park and enter Pick up meal Find table and eat Drive away, eat later See sign Stop car at order point Order via microphone Get meal at pickup, pay Home Delivery 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 Clear table and leave Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 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 Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

Success Factors in New Service Development § Market synergy Ø Good fit between new product and firm’s image/resources Ø Advantage vs. competition in meeting customers’ needs Ø Strong support from firm during/after launch Ø Firm understands customer purchase decision behavior § Organizational factors Ø Strong interfunctional cooperation and coordination Ø Internal marketing to educate staff on new product and its competition Ø Employees understand importance of new services to firm § Market research factors Ø Scientific studies conducted early in development process Ø Product concept well defined before undertaking field studies Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E