Creating the Service Product

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4- 1

Key Steps in Service Planning: Matching Opportunities to Resources

Must relate marketing opportunities to firms resources

(physical, financial, technological, human) Identify, evaluate firms marketing assets
Customer portfolio/lifetime value (customer equity) Market knowledge Marketing implementation skill Product line Competitive positioning strategies Brand reputation (brand equity) Physical facilities, equipment Technology and systems (especially IT) Human resources (numbers, skills, productivity) Leverage through alliances and partnerships Potential for customer self service Cost structure

Identify, evaluate firms operating assets

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4- 2

Service Design Involves Matching Marketing Concept with Operations Concept (Fig. 4.1)
Corporate Objectives and Resources
Marketing Assets
(Customer Base, Mkt. Knowledge, Implementation Skills, Brand Reput.)

Operating Assets
(Facilities/Equipment, IT Systems, People, Op. Skills, Cost Structure)

Service Marketing Concept

Benefits to customer from core/ supplementary elements, style, service level, accessibility User costs/outlays incurred Price/other monetary costs Time Mental and physical effort Neg. sensory experiences

Service Operations Concept

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

Service Delivery Process

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4- 3

Understanding the Components of the Augmented Service Product

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4- 4

Shostacks Molecular Model of a Total Market Entity - Passenger Airline Service (Fig. 4-2)
Distribution Price

Service
frequency

Vehicle

Transport

In-flight service

Pre- and post-flight service

KEY

Food and drink

Tangible elements Intangible elements

Marketing Positioning (Weighted toward evidence)
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

Source: Shostack
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Core Products and Supplementary Services

Most firms offer customers a package of benefits:

core product (a good or a service) 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:
facilitating use of the core service enhancing the value and appeal of the core

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4- 6

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 Customer Role

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4- 7

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

4- 8

Core and Supplementary Services in a Luxury Hotel (Offering Guests Much More than a Cheap Motel!)

Reservation Cashier Business Center A Bed for the Night in an Elegant Private Room with a Bathroom Valet Parking Reception Baggage Service

Room Service Wake-up Call T elephone

Cocktail Bar
Entertainment/ Sports / Exercise

Restaurant

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4- 9

What Happens, When, and in What Sequence? The Time Dimension in the Augmented Service Product

Reservation Parking Check in USE ROOM Get car Check out Phone USE GUESTROOM OVERNIGHT Porter Meal Pay TV Room service

Pre Visit

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

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4 - 10

The Flower of Service: Categorizing Supplementary Services (Fig. 4-5)

Information Payment Billing

Core

Consultation Order-Taking

Exceptions
KEY:

Hospitality Safekeeping

Facilitating elements Enhancing elements

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4 - 11

Facilitating Services - Information

(Table 4.1)

Core

Customers often require information about how to obtain and use a product or service. They may also need reminders and documentation

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4 - 12

Facilitating Services - Order-Taking

(Table 4.2)

Core

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

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4 - 13

Facilitating Services - Billing

(Table 4.3)

Core

How much do I owe you? Customers deserve clear, accurate and intelligible bills and statements

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4 - 14

Facilitating Services - Payment

(Table 4.4)

Core

Customers may pay faster and more cheerfully if you make transactions simple and convenient for them

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4 - 15

Enhancing Services - Consultation

(Table 4.5)

Core

Value can be added to goods and services by offering advice and consultation tailored to each customers needs and situation

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4 - 16

Enhancing Services - Hospitality

(Table 4.6)

Core

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!)

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4 - 17

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

4 - 18

Enhancing Services - Exceptions

(Table 4.8)

Core

Customers appreciate some flexibility in a business when they make special requests. They expect it when not everything goes according to plan

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4 - 19

Branding Service Products

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4 - 20

Service Branding: Clarifying Distinctive Service Offerings

Marriott Hotel Brands

Marriott Hotels Marriott Resorts

British Airways Brands

Intercontinental First Club World World Traveller Plus World Traveller European Club Europe Euro-Traveller UK Domestic Shuttle
4 - 21

Courtyard by Marriott
Fairfield Inns Residence Inns SpringHill Suites

TownePlace Suites
Marriott Vacation Clubs

International
Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Branding a High-Tech, B2B Product Line: A Family of Brands at Sun Microsystems

Corporate umbrella brand

Sun Microsystems

Product line brand (system support services)

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

4 - 22

Sun Spectrum Support: Sub-branding Highlights Four Service Levels

Sub-branding clarifies service levels offered at different fees
Platinum: Mission Critical

On-site service 24/7, two-hour response; telephone support 24/7, onsite parts replacement; additional services available
Gold: Business Critical

Onsite service Mon-Fri 8am-8pm, four-hour response; telephone support 24/7; onsite parts replacement
Silver: Basic Support

Onsite service Mon-Fri 8am-5pm, four-hour response; telephone support Mon-Fri 8am-8pm; onsite parts replacement
Bronze: Self Support

Phone support Mon-Fri 8am-5pm; parts replacement by courier

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

4 - 23

New Service Development

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4 - 24

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

4 - 25

New Service Development: Physical Goods as Source of Service Ideas

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

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Creating Services as Substitutes for Owning and/or Using Goods (Fig. 4-7)

Own a Physical Good

Rent the Use of a Physical Good

Rent car and drive it
Rent word processor and type

Perform the Work Oneself

Hire Someone to Do the Work

Drive own car Type on own word processor

Hire chauffeur to drive car Hire typist to use word processor

Hire a taxi or limousine Send work to secretarial service

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4 - 27

Service Development through Delivery Options: Alternative Meal Service Formats (Fig. 4-8)

Fast-Food Restaurant (Eat In) Drive-In Restaurant (Take Out) Home Delivery

See sign

Park and enter

Order meal, and pay

Pick up meal

Find table and eat

Clear table and leave

See sign

Stop car at order point

Order via microphone

Get meal at pickup, pay

Drive away, eat later

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

Staff cleans up; pay

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4 - 28

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

4 - 29

Success Factors in New Service Development

Market synergy
Good fit between new product and firms image/resources Advantage vs. 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 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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