No Slide Title

Chapter 4: Developing Service Products: Core and Supplementary Elements

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

1Overview of Chapter 4Planning and Creating ServicesThe Flower of ServiceBranding Service Products and ExperiencesNew Service DevelopmentServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

2Planning and Creating Service ProductsServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

3Service ProductsA service product comprises of all elements of service performance, both tangible and intangible, that create value for customers. Service products consist of:Core Product central component that supplies the principal, problem-solving benefits customers seekSupplementary Services augments the core product, facilitating its use and enhancing its value and appealDelivery Processes used to deliver both the core product and each of the supplementary services

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

4Designing a Service Concept Service concept design must address the following issues:How the different service components are delivered to the customerThe nature of the customers role in those processesHow long delivery lastsThe recommended level and style of service to be offeredServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

Documenting Delivery Sequence Over TimeMust address sequence in which customers will use each core and supplementary serviceDetermine approximate length of time required for each stepInformation should reflect good understanding of customers, especially their: needshabitsexpectations

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

6Integration of Core Product, Supplementary Elements, and Delivery Process

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

Temporal Dimension to Augmented ProductBefore VisitReservationinternetParking Get carCheck inPorterUse RoomMealPay TVRoom serviceInternetCheck outTime Frame of an Overnight Hotel Stay(real-time service use)

USE GUESTROOM OVERNIGHTInternetServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

8The Flower of ServiceServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

The Flower of ServiceThere are two types of supplementary servicesFacilitating: either needed for service delivery, or help in the use of the core productEnhancing: add extra value for the customerIn a well-managed service organization, the petals and core are fresh and well-formedMarket positioning strategy helps to determine which supplementary services should be included

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

The Flower of ServiceCoreInformationConsultationOrder-TakingHospitalityPaymentBillingExceptionsSafekeeping Enhancing elements Facilitating elementsKEY:Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

Facilitating Services Information

Directions to service site Schedules/service hours Prices Reminders Warnings Conditions of sale/service Notification of changes Documentation Confirmation of reservations Summaries of account activities Receipts and tickets

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

12Facilitating Services Order-Taking

Applications Memberships in clubs/programs Subscription services (e.g., utilities) Prerequisite based services (e.g., financial credit, college enrollment)Order Entry On-site order fulfillment Mail/telephone/e-mail/web orderReservations and Check-in Seats/tables/rooms Vehicles or equipment rental Professional appointments

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

13Facilitating Services Billing

Periodic statements of account activity Invoices for individual transactions Verbal statements of amount due Self-billing (computed by customer) Machine display of amount due

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

14Facilitating Services Payment

Self-Service Insert card, cash or token into machine Electronic funds transfer Mail a check Enter credit card number onlineDirect to Payee or Intermediary Cash handling or change giving Check handling Credit/charge/debit card handling Coupon redemptionAutomatic Deduction from Financial Deposits Automated systems (e.g., machine-readable tickets that operate entry gate) Human systems (e.g., toll collectors)

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

15Enhancing Services Consultation

Customized advice Personal counseling Tutoring/training in product use Management or technical consulting

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

16Enhancing Services Hospitality

GreetingFood and beveragesToilets and washroomsWaiting facilities and amenities Lounges, waiting areas, seating Weather protection Magazines, entertainment, newspapersTransportSecurity

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

17Enhancing Services Safekeeping

Caring for Possessions Customer Bring with Them Child care, pet care Parking for vehicles, valet parking Coat rooms Baggage handling Storage space Safe deposit boxes Security personnel

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

18Enhancing Services Safekeeping (cont)

Caring for Goods Purchased (or Rented) by Customers Packaging Pickup Transportation and delivery Installation Inspection and diagnosis Cleaning Refueling Preventive maintenance Repair and renovation

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

Enhancing Services Exceptions

Special Requests in Advance of Service Delivery Childrens needs Dietary requirements Medical or disability needs Religious observancesHandling Special Communications Complaints Compliments Suggestions

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

20Enhancing Services Exceptions (cont)

Problem Solving Warranties and guarantees Resolving difficulties that arise from usingthe product Resolving difficulties caused by accidents,service failures Assisting customers who have suffered an accident or a medical emergencyRestitution Refunds and compensation Free repair of defective goodsServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

Managerial ImplicationsCore products do not have to have supplementary elementsNature of product helps determine supplementary services offered to enhance valuePeople-processing and high contact services have more supplementary servicesDifferent levels of service can add extra supplementary services for each upgrade in service levelLow-cost, no-frills basis firms needs fewer supplementary elements

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

22Branding Service Products and ExperiencesServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

23Service Products, Product Lines, and BrandsService Product: A defined and consistent bundle of output Supported by supplementary services (assembly of elements that are built around the core product)Differentiated by bundle of outputProduct Line: Most service organizations offer a line of products rather than just a single product. There are three broad alternatives for product lines:Single brand to cover all products and servicesA separate, stand-alone brand for each offeringSome combination of these two extremesServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

24Spectrum of Branding Alternatives Source: Derived from Aaker and Joachimsthaler

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

25Example: British Airways SubbrandsBritish Airways offers seven distinct air travel productsIntercontinental OfferingsIntra-European OfferingsFirst (Deluxe Service)Club World (Business Class)World Traveller Plus (Premier economy)World Traveller (Economy)Club Europe (Business Class) Euro-Traveller (Economy)ShuttleServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

26Offering a Branded ExperienceBranding can be employed at corporate and product levelsCorporate brand:Easily recognized,Holds meaning to customers,Stands for a particular way of doing businessProduct brand:Helps firm communicate distinctive experiences and benefits associated with a specific service conceptServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

27Moving Towards a Branded ExperienceServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

Offering A Branded ExperienceThe brand promise or value proposition is not a tag line, an icon, or a color or a graphic element, although all of these may contribute.

It is, instead, the heart and soul of the brand.

Don SchultzServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

29New Service DevelopmentServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

30A Hierarchy of New Service Categories Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

31Reengineering Service ProcessesService processes affect customers and also cost, speed, and productivityReengineering analyzing and redesigning processes to achieve faster and better performanceExamination of processes can lead to creation of alternative delivery methods:Add or eliminate supplementary servicesRe-sequence delivery of service elementsOffer self-service optionsServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

32Physical Goods as a Source of New Service IdeasGoods and services may become competitive substitutes if they offer the same key benefitsProvides an alternative to owning the physical good that can attain the desired outcomeAny new good may create need for after-sales services now and be a source of future revenue streamServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

33Creating Services as Substitutes for Physical GoodDrive Own CarUse Own ComputerRent a Car and Drive itRent Use of Computer

Hire a Chauffeur to Drive Hire a Typist to Type Hire a Taxi or Limousine Send Work out to a Secretarial ServiceOwn a Physical GoodRent Use of Physical GoodPerform Work OneselfHire Someone to Do WorkServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

34Achieving Success in Developing New ServicesServices are not immune to high failure rates that plague new manufactured productsIn developing new services:core product is often of secondary importance, many innovations are in supplementary services or service deliveryability to maintain quality of the total service offering is keyaccompanying marketing support activities are vitalMarket knowledge is of utmost importanceServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

35Success Factors in New Service DevelopmentMarket synergyGood fit between new product and firms imageAdvantage in meeting customers needsStrong support from firm during and after launchUnderstands customer purchase decision behaviorOrganizational factorsStrong inter-functional cooperation and coordinationInternal marketing to educate staff on new product and its importanceServices MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

36Success Factors in New Service DevelopmentMarket research factorsScientific studies conducted early in development processProduct concept well defined before undertaking field studies

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

SummaryCreating services involve:Designing the core product, supplementary services, and their delivery processesFlower of service includes core product and two types of supplementary services: facilitating and enhancingFacilitating services include information, order taking, billing, and paymentEnhancing services include consultation, hospitality, safekeeping, and exceptions

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

38SummarySpectrum of branding alternatives exists for servicesBranded houseSubbrandsEndorsed brandsHouse of brands

To develop new services, we can Reengineer service processesUse physical goods as a source of new service ideasUse research to design new servicesUnderstand how to achieve success in new service development

Services MarketingSlide 2010 by Lovelock & WirtzServices Marketing 7/e

Chapter 4 Page #

39