Chapter 3:
Developing Service Concepts: Core and Supplementary Elements
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 1
Overview of Chapter 3
1. Planning and Creating Services*
2. The Flower of Service* 3. Planning and Branding Service Products 4. Development of New Services
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 2
1. Planning and Creating Services a) Design a Service Concept
b) Document Delivery Sequence over Time c) Flowchart Service Delivery
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
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:
A core product Accompanied by supplementary services
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
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: Facilitating use of core product (a service or a good) Enhancing the value and appeal of the core product
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 3 - 5
a) Designing a Service Concept
Core Product
Central component that supplies the principal, problem-solving benefits customers seek
Supplementary Services
Augment 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 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 6
Core and Supplementary Product Design: An Integrated Perspective (Fig 3.2)
Supplementary services offered and delivered
Scheduling
Nature of Process
Delivery Concept for Core Product
Service Level
Customer Role
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 7
Core and Supplementary Services at Luxury Hotel (Offering Much More than Cheap Motel!)
Reservation Cashier Business Center Room Service A Bed for the Night in an Elegant Private Room with a Bathroom Valet Parking Reception
Baggage Service Cocktail Bar
Wake-up Call Internet
Entertainment/ Restaurant Sports/ Exercise
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 8
Defining Core and Supplementary Elements of Our Service Product How is our core product defined and what supplementary elements augment it? What product benefits create most value for customers? What are current levels of service on core product and each supplementary element? Can we charge more for higher service levels? For example: Alternatively, should we cut service levels and charge less?
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 3 - 9
b) Documenting Delivery Sequence Over Time Must address sequence in which customers will use each core and supplementary service
Determine length of time for each step
Information should reflect good understanding of customers, especially their: Needs Habits Expectations Question: Do customers expectations change during service delivery in light of perceived quality of each sequential encounter?
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 3 - 10
What Happens, When, in What Sequence? Time Dimension in Augmented Product (Fig 3.3)
Reservation
Parking Check in Internet Use room Porter Meal Pay TV Room service Get car Check out Internet USE GUESTROOM OVERNIGHT internet
Before Visit
Time Frame of An Overnight Hotel Stay (Real-time service use)
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 11
c) Flowcharting Service Delivery
Offers way to understand totality of customers service experience Useful for distinguishing between core product itself and service elements that supplement core Restaurants: Food and beverage (core) Reservations (supplementary services) Shows how nature of customer involvement with service organizations varies by type of service: People processing Possession processing Mental Stimulus processing Information processing
Services Marketing 6/E Chapter 3 - 12
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Simple Flowchart for Delivery of a People-Processing Service (Fig 3.4)
People Processing Stay at Motel
Park Car Check In Spend Night in Room Breakfast Check Out
Maid Makes up Room
Breakfast Prepared
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 13
Simple Flowchart for Delivery of a Possession-Processing Service (Fig 3.4)
Possession Processing Repair a DVD Player
Travel to Store Technician Examines Player, Diagnoses Problem Leave Store Return, Pick up Player and Pay
(Later) Play DVDs at Home
Technician Repairs Player
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 14
Simple Flowchart for Delivery of Mental Stimulus-Processing Service (Fig 3.4)
Mental Stimulus Processing Weather Forecast
Turn on TV, Select Channel Collect Weather Data View Presentation of Weather Forecast Confirm Plans for Picnic
Meteorologists Input Data to Models and Creates Forecast from Output
TV Weatherperson Prepares Local Forecast
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 15
Simple Flowchart for Delivery of An Information-Processing Service (Fig 3.4)
Information Processing Health Insurance
Learn about Options Select Plan, Complete Forms
Pay
Insurance Coverage Begins
Printed Policy Documents Arrive
University and Insurance Company Agree on Terms of Coverage
Customer Information Entered in Database
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 16
2. The Flower of Service (Fig 3.6)
Information Payment Billing
Core
Consultation Order Taking
Exceptions Safekeeping
KEY:
Hospitality
Facilitating elements Enhancing elements
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 3 - 17
The Flower of Service: Facilitating ServicesInformation
Customers often require information about how to obtain and use a product or service. Core Examples of elements:
Directions to service site Schedule/service hours Prices Conditions of sale Usage instructions
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 18
The Flower of Service: Facilitating ServicesOrder 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
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 19
The Flower of Service: Facilitating ServicesBilling
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
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 20
The Flower of Service: Facilitating ServicesPayment
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
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 21
The Flower of Service: Enhancing ServicesConsultation
Core
Value can be added to goods and services by offering advice and consultation tailored to each customers needs and situation. Examples of elements:
Customized advice Personal counseling Management consulting
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 22
The Flower of Service: Enhancing ServicesHospitality
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
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 23
The Flower of Service: Enhancing ServicesSafekeeping
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
(or rented) by customers
customers bring with them
Caring for goods purchased
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 24
The Flower of Service: Enhancing ServicesExceptions
Customers appreciate some flexibility when they make special requests and expect responsiveness when things dont go according to plan.
Core
Examples of elements: Special requests in advance Complaints or compliments Problem solving Restitution
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 25
Managerial Implications To develop product policy and pricing strategy, managers need to determine: Which supplementary services should be offered as a standard package or as options
Firms that compete on a low-cost, no-frills basis needs fewer supplementary elements
Each flower petal must receive consistent care and concern to remain fresh and appealing
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 26
How to Determine What Supplementary Services Should Be Offered Nature of product helps to determine:
Which supplementary services must be offered Which might usefully be added to enhance value People-processing and high-contact services tend to have more supplementary services
Market positioning strategy helps to determine which supplementary services should be included
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 27
3. Planning and Branding Service Products
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 28
Service Products
A service product: A defined and consistent bundle of output Service firms can differentiate their products in similar fashion to various models offered by manufacturers Providers of more intangible services also offer a menu of products Represent an assembly of elements that are built around the core product May include certain value-added supplementary services
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 3 - 29
Product Lines and Brands
Most service organizations offer a line of products rather than just a single product They may choose among three broad alternatives:
Single brand to cover all products and services A separate, stand-alone brand for each offering Some combination of these two extremes
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 30
Spectrum of Branding Alternatives
(Fig 3.8)
Corporate Branding
Branded House
e.g., Virgin Group Sub-brands e.g., Raffles Class at Singapore Airlines Endorsed Brands e.g., Courtyard by Marriott
Individual Product Branding
House of Brands e.g., P&G
Source: Derived from Aaker and Joachimsthaler
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 3 - 31
Example: British Airways Sub-brands
British Airways offers six distinct air travel products
Four intercontinental offerings:
First (deluxe service) Club World (business class) World Traveller Plus (premier economy class) World Traveller (economy class)
Two intra-European offerings:
Club Europe Euro-Traveller
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 32
Offering a Branded Experience (1)
Branding can be employed at both 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 Moving toward branded customer experience includes: Create brand promise Shape truly differentiated customer experience Give employees skills, tools, and supporting processes to deliver promise Measure and monitor
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 3 - 33
Offering a Branded Experience (2)
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
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 34
4. Developing New Services
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 35
A Hierarchy of New Service Categories (1)
1. Major service innovations
New core products for previously undefined markets
2. Major process innovations
Using new processes to deliver existing products with added benefits
3. Product-line extensions
Additions to current product lines
4. Process-line extensions
Alternative delivery procedures
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 36
A Hierarchy of New Service Categories (2)
5. Supplementary service innovations
Addition of new or improved facilitating or enhancing elements
6. Service improvements
Modest changes in the performance of current products
7. Style changes
Visible changes in service design or scripts
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 37
Reengineering Service Processes involves analyzing and redesigning processes to achieve faster and better performance Running tasks in parallel instead of sequence can reduce/eliminate dead time
Examination of processes can lead to creation of alternative delivery methods
Add/eliminate supplementary services Resequence delivery of service elements Offer self-service options
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 38
Physical Goods as a Source Of New Service Ideas
Services can be built around rentals: Alternatives to owning a physical good and/or doing work oneself Customers can rent goodsuse and return for a feeinstead of purchasing them Customers can hire personnel to operate own or rented equipment
Any new durable good may create need for after-sales services now and in future possession processing
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 3 - 39
Creating Services as Substitutes for Owning and/or Using Goods (Fig 3.10)
Own a Physical Good Rent Use of a Physical Good
Perform Work Oneself
Drive Own Car Use Own Computer
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
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 3 - 40
Achieving Success in Developing New Services In developing new services Core product is of secondary importance Ability to maintain quality of the total service offering is key
Accompanying marketing support activities are vital
Market knowledge is of utmost importance
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 3 - 41
Success Factors in New Service Development
Market synergy
Good fit between new product and firms image/resources Advantage versus 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
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 3 - 42
