SM7 Ch04 Product

Services Marketing
Chapter 4: Developing Service Products: Core and Supplementary Elements
Slide 2011 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 4 Page 1
Overview of Chapter 4
Services Marketing
Planning and Creating Services The Flower of Service Branding Service Products and Experiences New Service Development
Chapter 4 Page 2
Services Marketing
Planning and Creating Service Products
Chapter 4 Page 3
Service Products
Services Marketing A 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 seek Supplementary Services augments the core product, facilitating its use and enhancing its value and appeal
Delivery Processes used to deliver both the core product and each of the supplementary services
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 4 Page 4
Designing a Service Concept

Services Marketing
Service concept design must address the following issues:

How the different service components are delivered to the customer The nature of the customers role in those processes How long delivery lasts
The recommended level and style of service to be offered
Chapter 4 Page 5
Documenting Delivery Sequence Over Time
Services Marketing
Must address sequence in which customers will use each core and supplementary service Determine approximate length of time required for each step Information should reflect good understanding of customers, especially their:
needs habits expectations
Chapter 4 Page 6
Integration of Core Product, Supplementary Elements, and Delivery Process
Services Marketing
Chapter 4 Page 7
Temporal Dimension to Augmented Product

Reservation Parking Check in Internet Use Room Porter Meal Pay TV
Services Marketing
Get car Check out Internet USE GUESTROOM OVERNIGHT internet
Room service
Before Visit
Time Frame of an Overnight Hotel Stay (real-time service use)
Chapter 4 Page 8
Services Marketing
The Flower of Service
Chapter 4 Page 9

Services Marketing
There are two types of supplementary services

Facilitating: either needed for service delivery, or help in the use of the core product Enhancing: add extra value for the customer
In a well-managed service organization, the petals and core are fresh and well-formed Market positioning strategy helps to determine which supplementary services should be included
Chapter 4 Page 10

Services Marketing
Information Payment Billing Exceptions

KEY:
Consultation
Core
Order-Taking Hospitality
Safekeeping
Enhancing elements Facilitating elements
Chapter 4 Page 11
Facilitating Services Information

Services Marketing 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
Chapter 4 Page 12
Facilitating Services Order-Taking

Services Marketing 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 order Reservations and Check-in Seats/tables/rooms Vehicles or equipment rental Professional appointments
Facilitating Services Billing

Services Marketing Periodic statements of account activity Invoices for individual transactions Verbal statements of amount due Self-billing (computed by customer) Machine display of amount due
Chapter 4 Page 14
Facilitating Services Payment

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

Services Marketing Customized advice Personal counseling Tutoring/training in product use Management or technical consulting
Chapter 4 Page 16
Enhancing Services Hospitality

Services Marketing Greeting Food and beverages Toilets and washrooms Waiting facilities and amenities Lounges, waiting areas, seating Weather protection Magazines, entertainment, newspapers Transport Security
Chapter 4 Page 17
Enhancing Services Safekeeping

Services Marketing 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
Chapter 4 Page 18
Enhancing Services Safekeeping (cont)
Services Marketing
Caring for Goods Purchased (or Rented) by Customers Packaging Pickup Transportation and delivery Installation Inspection and diagnosis Cleaning Refueling Preventive maintenance Repair and renovation
Chapter 4 Page 19
Enhancing Services Exceptions

Services Marketing Special Requests in Advance of Service Delivery Childrens needs Dietary requirements Medical or disability needs Religious observances Handling Special Communications Complaints Compliments Suggestions
Chapter 4 Page 20
Enhancing Services Exceptions (cont)
Services Marketing
Problem Solving Warranties and guarantees Resolving difficulties that arise from using the product Resolving difficulties caused by accidents, service failures Assisting customers who have suffered an accident or a medical emergency Restitution Refunds and compensation Free repair of defective goods
Managerial Implications
Services Marketing Core products do not have to have supplementary elements Nature of product helps determine supplementary services offered to enhance value People-processing and high contact services have more supplementary services Different levels of service can add extra supplementary services for each upgrade in service level
Low-cost, no-frills basis firms needs fewer supplementary elements

Services Marketing
Branding Service Products and Experiences
Chapter 4 Page 23
Service Products, Product Lines, and Brands
Services Marketing
Service 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 output
Product 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 services A separate, stand-alone brand for each offering Some combination of these two extremes
Chapter 4 Page 24
Spectrum of Branding Alternatives

Services Marketing
Source: Derived from Aaker and Joachimsthaler

Example: British Airways Subbrands
Services Marketing
British Airways offers seven distinct air travel products

Intercontinental Offerings
Club World
Intra-European Offerings
First (Deluxe Service)
Club Europe (Business Class)
(Business
Class)
Shuttle World
Traveller Plus (Premier economy)
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e
World
Traveller (Economy)
EuroTraveller (Economy)
Chapter 4 Page 26
Offering a Branded Experience

Services Marketing
Branding can be employed at corporate and product levels Corporate brand:

Easily recognized, Holds meaning to customers,
Stands for a particular way of doing business
Product brand:
Helps firm communicate distinctive experiences and benefits associated with a specific service concept
Chapter 4 Page 27
Moving Towards a Branded Experience
Services Marketing
Create brand promise
Shape truly differentiated customer experience
Give employees skills, tools, and supporting processes to deliver promise
Measure and monitor
Chapter 4 Page 28
Offering A Branded Experience

Services Marketing
The 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 Schultz
Chapter 4 Page 29
Services Marketing
New Service Development
Chapter 4 Page 30
A Hierarchy of New Service Categories
Services Marketing
Major Service Innovations: New core products for previously undefined markets Major Process Innovations: Using new processes to deliver existing products with added benefits Product Line Extensions: Addition to current product lines Process-line Extensions: Alternative delivery procedures Supplementary Service Innovations: Additions of new or improved facilitating or enhancing elements
Service Improvements: Modest changes in the performance of current products

Style Changes: Visible changes in service design or scripts
Reengineering Service Processes

Services Marketing
Service processes affect customers and also cost, speed, and productivity Reengineering analyzing and redesigning processes to achieve faster and better performance Examination of processes can lead to creation of alternative delivery methods:
Add or eliminate supplementary services Re-sequence delivery of service elements Offer self-service options
Chapter 4 Page 32
Physical Goods as a Source of New Service Ideas
Services Marketing
Goods and services may become competitive substitutes if they offer the same key benefits Provides an alternative to owning the physical good that can attain the desired outcome Any new good may create need for after-sales services now and be a source of future revenue stream
Chapter 4 Page 33
Creating Services as Substitutes for Physical Good

Own a Physical Good Perform Work Oneself
Drive Own Car Use Own Computer
Services Marketing
Rent Use of Physical Good
Rent a Car and Drive it

Rent Use of Computer
Hire Someone
to Do Work
Hire a Chauffeur to Drive Hire a Typist to Type
Hire a Taxi or Limousine Send Work out to a Secretarial Service
Chapter 4 Page 34
Achieving Success in Developing New Services
Services Marketing
Services are not immune to high failure rates that plague new manufactured products In developing new services:
core product is often of secondary importance, many innovations are in supplementary services or service delivery ability to maintain quality of the total service offering is key accompanying marketing support activities are vital Market knowledge is of utmost importance
Chapter 4 Page 35
Success Factors in New Service Development

Market synergy
Services Marketing
Good fit between new product and firms image Advantage in meeting customers needs Strong support from firm during and after launch Understands customer purchase decision behavior
Organizational factors
Strong inter-functional cooperation and coordination Internal marketing to educate staff on new product and its importance
Chapter 4 Page 36
Success Factors in New Service Development
Services Marketing
Market research factors

Scientific studies conducted early in development process Product concept well defined before undertaking field studies
Chapter 4 Page 37
Summary
Services Marketing
Creating services involve:

Designing the core product, supplementary services, and their delivery processes
Flower of service includes core product and two types of supplementary services: facilitating and enhancing
Facilitating services include information, order taking, billing, and payment Enhancing services include consultation, hospitality, safekeeping, and exceptions
Chapter 4 Page 38
Summary
Services Marketing
Spectrum of branding alternatives exists for services

Branded house Subbrands Endorsed brands House of brands
To develop new services, we can

Reengineer service processes Use physical goods as a source of new service ideas Use research to design new services Understand how to achieve success in new service development
Chapter 4 Page 39

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Services Marketing

Chapter 4: Developing Service Products: Core and Supplementary Elements

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

Planning and Creating Service Products

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

Service products consist of:

Designing a Service Concept

Service concept design must address the following issues:

The recommended level and style of service to be offered

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

Documenting Delivery Sequence Over Time

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

Integration of Core Product, Supplementary Elements, and Delivery Process

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

Temporal Dimension to Augmented Product

Get car Check out Internet USE GUESTROOM OVERNIGHT internet

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

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

The Flower of Service

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

The Flower of Service

There are two types of supplementary services

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

The Flower of Service

Information Payment Billing Exceptions

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

Facilitating Services Information

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

Facilitating Services Order-Taking

Facilitating Services Billing

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

Facilitating Services Payment

Enhancing Services Consultation

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

Enhancing Services Hospitality

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

Enhancing Services Safekeeping

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

Enhancing Services Safekeeping (cont)

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e

Enhancing Services Exceptions

Slide 2011 by Lovelock & Wirtz

Services Marketing 7/e