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Diagnosing the Supplementary Services Model

Over three decades ago, Levitt (1980) stated: 'There is no such thing as a commodity. All
goods and services are diIIerentiable. (p. 83) Levitt argues that while the core product is
typically undiIIerentiated, the oIIered product`, consisting oI supplementary` services
makes the diIIerence between success and Iailure in competitive marketplaces. The special
contribution oI this early contribution lies in the recognition that supplementary elements
have a proIound impact on customer value. However, this concept lacked a structure to assist
managers in identiIying which speciIic elements might be added to the core product. To
address this issue, Lovelock (1992) developed a 'supplementary services model` which
provides some speciIic guidelines as to where to seek value enhancement Ior customers.
Lovelock`s model suggests that whilst there are many diIIerent supplementary services, most
can be classiIied into eight clusters: information, consultation, order-taking, hospitalitv,
safekeeping, exceptions, billing, and pavment. His theoretical model provides a more
structured approach Ior considering the expected, augmented and potential service elements.
The authors` experience in using this model with executives over many years supports the
view that the model is oI considerable practical value to managers. However, despite the
model having been in existence Ior some time there has been little empirical academic work
undertaken to assess its contribution. Thus, it is timely review the contribution and
applicability oI the supplementary services model to contemporary companies.
The purpose oI our paper is to explore the origins, development and applicability oI
this model. We Iocus on services, reIlecting both the services Iocus oI Lovelock`s research
and the overall importance oI the services sector. The paper is structured as Iollows. First, we
review the literature relating to the concept oI core product and supplementary services.
Second, we examine the supplementary services model and related research. Third, we
investigate the applicability oI the model in ten service companies and develop a revised
supplementary services model. Finally, we consider the contribution and Iuture research.
The Core` Product, Supplementary` Services and Related Research
Levitt (1974) points out that it is not just the central core product that diIIerentiates, but rather
it is the whole cluster oI value satisIactions that surround it. Later, Levitt outlines a view oI a
product at Iour levels: the core product; the expected product; the augmented product; and,
the potential product (Levitt, 1980). Shostack (1977) illustrates how services vary in terms oI
perceived intangibility possessing both tangible and intangible elements. She develops a
molecular model Ior visualization and management oI the total oIIer. This molecule is
surrounded by a series oI bands which include price, distribution and market positioning.
Anderson and Narus (1995) investigate supplementary services in the context oI business to
business (B2B) services. These authors conclude suppliers in B2B markets typically provide
customers with more services than they want or need. This can incur costs that do not reIlect
value to customers. This largely theoretical work highlights the importance oI supplementary
services. In addition to core product, supplementary services can be used to Iacilitate the use
oI the core product, enhance its perceived value, and enable to charge a premium price
(Bitner, Brown & Meuter, 2000; Lovelock, 1992; Storey & Easingwood, 1998).
In order to enhance these earlier concepts and address some oI their limitations (e,g.,
Naipaul & Parsa, 2000), a supplementary services model` (Lovelock, 1992; 1995) was
developed aimed at identiIying how additional services could augment the core service. His
model identiIies eight speciIic clusters, shown in Figure 1, that represent groups oI
supplementary services which can diIIerentiate and add value to the core product.
Lovelock`s model has several beneIits over previous conceptualizations oI the augmented
product. First, it identiIies eight speciIic clusters oI supplementary services. Second, within
each cluster, Lovelock provides a list oI categories and illustrations oI types oI supplementary
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services within them. Third, he suggests viewing these eight supplementary service elements
as a Ilower oI service`- a powerIul metaphor that draws attention to the importance oI a well
designed and executed service across all its dimensions. However, despite the exposure oI
Lovelock`s work (1991; 1992; 1994; 1995; 1996; 1999) we identiIy relatively little empirical
work relating to his model or to supplementary services in general.
Figure 1 - The Supplementary Services Model
Hospitality
Safekeeping
Order taking
Consultation
nformation
Payment
Exceptions
Storey and Easingwood (1998) explore the augmented service oIIering` (ASO). In
their conceptualization, they include not only the service product` (core product) and the
service augmentation` (supplementary services), but also marketing support`. Research by
Naipaul and Parsa (2000) investigate supplementary services within the tourism sector.
However, their empirical work Iocuses on only one cluster oI supplementary services. Work
by Colgate and Alexander (2002) examines the beneIits and barriers oI product augmentation
in the context oI retailers and Iinancial services. Goyal (2004) explores thirteen
supplementary services in the context oI banks` credit card services. However, it is not clear
how these supplementary services were identiIied. Hume`s (2008) empirical work in the
context oI perIorming arts identiIies core product and supplementary services as distinct
constructs. She concludes there needs to be a shiIt in managerial practice in the perIorming
arts Irom a Iocus on core aspects oI the service to delivery oI supplementary Iactors. A study
by Major, McLeay and Waine (2010) uses the supplementary services model to identiIy and
illustrate the cluster oI services that diIIerentiate a company oIIering a packaged overseas
wedding service, PerIect Weddings Abroad. They identiIy that most oI the eight generic
categories are appropriate to this specialized business.
We conclude, Irom our literature review, that Lovelock`s supplementary services
model is the most detailed theoretical model Ior considering augmentation oI the core
product. However, there is little work on validation oI this theoretical model. In practice, in
services markets, many Iirms Iind it diIIicult to diIIerentiate their core product (Goyal, 2004).
As a result, managers may struggle to identiIy which supplementary services are important
and eIIective in Iacilitating the use oI the core product and enhancing its value. Little
attention has been given to this important issue, which, iI addressed, should permit managers
to more eIIectively manage supplementary services and provide greater value to customers.
As a consequence, two important research questions remain unanswered with respect
to application oI the supplementary services model: (1) are the eight supplementary services
clusters relevant to diIIerent service sectors; and (2) to what extent is Lovelock`s list oI
categories and illustrations oI supplementary services within each cluster relevant to diIIerent
service sectors? The balance oI this paper addresses these practice-oriented research issues.
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The Research
As relatively little has been written about the use or applicabilitv oI the supplementary
services model, our discovery-oriented approach utilized interactive research` with managers
(Gummesson, 2002). This approach involves active engagement with managers who 'play a
crucial role in testing concepts and ideas, resulting in research generation (2002, p. 345).
Two cohorts oI early-career and mid-career managers attending an advanced course in
customer management, where an exploration oI supplementary service Iormed a major
component oI the course, were used to explore the applicability oI the supplementary service
model. All had Iirst degrees, most in marketing or business and had experience in multiple
industry sectors. Ten companies covering a range oI services (Ior a list see Appendix 1)
including a retailer, a Iast Iood company, a transportation company, a conIerence Iacility, a
transit authority, a roadside assistance company, a restaurant, a coIIee chain, a hotel and an
express parcel service were utilized in the research. Our Iocus was on experience services`
(e.g., retailing, transport, accommodation), deIined as those Ior which customers can collect
service inIormation by way oI experience and make judgments aIter purchase or experience
(Keh and Pang 2010). (We did not emphasize credence services` (e.g. Iinance, education)
where customers have diIIiculties in collecting inIormation by way oI experience and may
not make conIident evaluations even aIter purchase.) A total oI 61 managers were involved in
the research. Starting with a list oI companies the managers had worked Ior, 10 companies -
with an emphasis on experience services - were chosen by the researchers to represent a
diverse range oI services. For each company, groups oI 5-7 mangers were selected based on
where their existing and previous employment and where they had substantial industry
knowledge and contacts. Working with the researchers, each group utilized a range oI
methodologies considered most appropriate to the context oI that company. This included
customer interviews and surveys, mystery shopping, staII interviews, staII questionnaires,
benchmarking, observation and site visits and company documentation reviews, as detailed in
Appendix 1. This research was carried out over a total oI 8 weeks. Over the duration oI the
project, Iive interactive brieIing and co-ordinating workshops, each oI 3 hours` duration,
were held by the researchers with all the groups, as well as Iurther individual group meetings.
Applicabilitv of Supplementarv Services Clusters. With the exception oI the research
by Major et al. (2010), we identiIy no testing oI the applicability oI the model clusters in the
extant literature. Thus, the Iirst phase oI the research aimed at exploring the applicability oI
the eight supplementary service clusters within the 10 service companies. Each oI the groups
assessed the applicability oI each oI the eight service clusters to the company they were
investigating and considered any additional cluster that might be relevant. This involved
identiIying individual categories and sub-categories within each service cluster. A summary
oI the Iindings relating to the applicability oI the clusters to each company is shown in
Appendix 1. The Iindings in Appendix 1 demonstrates the overall high applicability oI the
eight supplementary service clusters within these 10 Iirms, providing general support Ior
many oI the clusters in Lovelock`s theoretical model. The clusters oI inIormation, order
taking, hospitality, saIekeeping and exceptions were Iound to be relevant clusters Ior all 10
Iirms. The consultation process was Iound to be relevant in 8 oI the 10 Iirms. Billing and
payment were considered discrete clusters in only 3 oI the 10 Iirms, so were amalgamated.
The term saIekeeping` was Iound to be overly restrictive and the term customer care` was
Iound to be a more appropriate tem Ior the cluster. One additional cluster, social
responsibility`, was identiIied as being an important supplementary service Ior the express
parcel service. The revised clusters representing these changes are shown in Table 1.
Evaluation of Supplementarv Service Categories and Sub-Categories. We next
explored Lovelock`s classiIication oI speciIic elements within each oI the service clusters.
Lovelock (1995) notes his list oI supplementary service categories 'does not claim to be all
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encompassing (p. 46). We wished to evaluate whether these represent a comprehensive and
general checklist applicable to most services.
A spreadsheet-based approach was used to compare the cluster categories in the
model with those categories and sub-categories identiIied Ior each oI the ten Iirms. We Iound
that whilst some oI Lovelock`s categories were highly relevant Ior all 10 service Iirms, some
were not relevant to any oI them. We concluded that a reconstituted and more comprehensive
categorisation model was needed. The logic we used to identiIy a more detailed set oI
categories and sub-categories was abductive` (Dubois & Gadde, 2002). Abductive research
involves 'going back and Iorth` between a model, data sources, and analysis and between
observations and theory (p. 555). The results oI this process are shown in Table 1. Drawing
on the data Irom the 10 service Iirms and Lovelock`s original categories, the revised
supplementary services model in Table 1 provides a substantially revised set oI
supplementary services categories and subcategories and incorporates the above
modiIications to the clusters.
Conclusions and Research Implications
We conclude that the supplementary services model has made a signiIicant contribution to
the concept oI product augmentation and diIIerentiation. Its special value lies in recognition
that additional elements, beyond the product itselI, have a proIound impact on the value that
can be added Ior customers. However, work in this area has two limitations. First, there has
not been previous cross-company work validating its clusters. Second, the categories within
each cluster oI Lovelock`s model do not appear to be Iully comprehensive or applicable to
the wide range oI service types. Research into the application oI the supplementary services
model is lacking, hence the discovery-oriented approach adopted in this paper.
Our paper contributes to the literature on services marketing by providing a revised
supplementary services model. This revised model provides an improved representation oI
supplementary services Ior contemporary Iirms seeking to improve their competitive position
through better service augmentation. It also provides a more detailed exploration and
extension oI the categories and subcategories within the original supplementary services
model. Our revised model also has practical implications Ior use by managers. It identiIies 21
categories and 48 sub-categories within nine service clusters that can be utilized by managers
seeking to enhance competitive capabilities through service augmentation
However, whilst our research explores the applicability oI this model, it has some
limitations that point to opportunities Ior Iurther research. First, empirical work applying our
revised supplementary services model is needed. We suggest that detailed case study research
would provide additional insights relevant to the application oI the model in diIIerent
organisational settings. Second, an examination oI the substantial output oI Lovelock`s work
suggests most discussion relates to the services sector and especially consumer services. Our
revised supplementary services Iramework could be tested more widely in B2B services as
well as in other goods-based industry sectors. Third, the potential beneIits oI co-creation in
developing new and enhancing existing supplementary services, suggests an intriguing area
Ior investigation. Fourth, exploration is needed oI the supplementary services concept in the
context oI intermediated markets. FiIth, Anderson and Narus (1995) conclude suppliers in
B2B markets typically provide some customers with more services than they want or need.
This involves greater tailoring oI supplementary services to speciIic B2B customer segments.
We consider this is also applicable to B2C services. Finally, the international context oI the
service oIIer needs to be explored. Lovelock (1999) notes that in the development oI a trans-
national strategy, a Iirm`s management needs to consider which, iI any, supplementary
services should remain consistent across all international markets and which ones should be
modiIied, added to, or omitted. No extant empirical literature appears to address this issue.
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Table 1 - Revised Supplementary Services Model
SUPLEMENTARY SERVICE ELEMENT GENERIC CATEGORY SUB CATEGORY EXAMPLES
INFORMATION
Data that assists customers during each stage
oI the purchasing and relationship cycle.
1. Product inIormation Product use and care inIormation
Availability oI product/services
Personalised inIormation based on customer proIile
Price comparisons and promotion inIormation
e.g. user guides and product/service manuals, online
personalization options, coupons, giIt cards, glossary,
Iorms, privacy policy, warranty inIormation, customer
stories
2. Supplier inIormation Contact, location and hours oI operation inIormation.
Conditions oI sale
3. Other inIormation Reminders, notiIications and conIirmations
Opinions oI other customers
Reviews and recommendations Irom experts
CONSULTATION
Two way dialogue between customer and
supplier in assessing how to collaborate
together
1. Supplier initiated consultation Customer Ieedback system
Service advice and technical consultancy.
e.g. chat live with Iirm experts, join the Iorum, share
ideas, share experience, read blogs, ratings and
reviews, Ian club 2. Customer initiated consultation Service needs assessment
Customer complaints
3. Collaborative Firm-customer interaction
Customer-customer interaction
ORDER PROCESSING
Supplier process enabling easy order taking,
processing and IulIillment.
1. Order entry Accurate data entry
Online order
OIIline order
e.g. my tracking account, where to Iind my order
number, quotation number and reIerence number,
appearance and Iriendliness oI delivery driver
2. Order monitoring Order notiIication and progress report
Tracking system
3. Order IulIillment Inventory management
Order delivery
HOSPITALITY
Social interaction between supplier and
customer
1. On-site, direct hospitality Introductions and greetings
Customer amenities
e.g. Iriendliness oI receptionist, welcome with smile
and greetings, toilets and washrooms, reIreshment
Iacilities, waiting room Iacilities, entertainment, voice
recognition system, membership club
2. In-direct hospitality EIIective data capture
EIIective data mining Ior customer proIiling
CUSTOMER-CARE
Care Ior customers and their valuabales
1. Care Ior customers Data protection
On-site customer care
OII-site customer care
e.g. order process security, access code, 24hr mobile
service is available across states Ior consultancy and
Iull onsite customer care, email customer care Ior non-
technical issues such as billing, delivery inIormation,
or general inIormation, disabled Iacilities, Kidz Cabs,
justice oI the peace service, parents room
2. Care Ior customers` valuables Care oI customer`s purchases
Care oI customer`s other possessions e.g. cars, children, pets
EXCEPTIONS
Service recovery or variations
1. Customer request Ior service variations Special request Ior customized service
Out-oI-hours services
e.g. explaining service variations to customers,
encouraging customer to voice their complaints via
transaction-driven surveys, six sigma programs,
implied warranties, liIetime warranty
2. Customer complaints and suggestions Service Iailure resolution
Customer suggestions and compliments
3. Problem resolution Warranties and guarantees
Service help desk
Emergency and accident response system
BILLING & PAYMENT 1. Billing system Account data
Invoice data
e.g. timely and accurate invoice, online payment
solution, my account, BPAY, credit card (by phone),
direct debit( automatic payment), mail, in person 2. Account activity system
Credit status
Account maintenance
3. Payment system Cash payments
Non-cash payments
SUSTAINABILITY & SOCIAL
RESPONSIBILITY
1. Customer collaboration in socially
responsible activities
Charitable assistance
Participation in recycling
e.g. community Iair trade, protect our planet, stop
children traIIicking, against animal testing, promoting
well-being, energy eIIiciency, charity houses 2. Supplier involvement in socially
responsible activities
Support oI selected charities
Green initiatives
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Appendix 1 - Analysis of Supplementary Service Clusters in Ten Service Firm
Companles Surveyed
lzza 8esLauranL
Chaln
MulLlmedla
8eLaller
Conference
PoLel
lnLernaLlonal
Coffee Chaln
ClLy 1ranslL
AuLhorlLy
1ransporLaLlon
Servlces
Lxpress arcel
Servlce
naLlonal
8esLauranL Chaln
8oadslde
AsslsLance
naLlonal PoLel
Chaln
1 lnformaLlon
2 ConsulLaLlon
3 Crder-Laklng
4 PosplLallLy
3 Safekeeplng
6 LxcepLlons
7 8llllng
8 aymenL
Soclal 8esponslblllLy

uk Lurope uk uk, Canada, Chlna Lurope uk uk uk uk uk
lzza PuL vlrgln M'sLores Sunrldge ark SLarbucks London u'ground SLage Coach uPL Cafe 8ouge 8AC PllLon
uomlno's 8orders ue vere venues Clorla !ean's arls MeLro naLlonal Lxpress lederal Lxpress 8ella asLa AA Crowne laza
lzza Lxpress WaLersLones lnmarsaL Conf. Coffee 8epubllc Cerman u-8ahn easy8us 1n1 reL a Manger Creen llag Le Merldlen
Countr|es ] keg|on Iocus
I||ustrat|ve Compan|es |n Sector
Supp|ementary Serv|ce C|uster
Survey Method

CusLomer lnLervlew/ Survey
MysLery Shopplng
SLaff lnLervlews
SLaff CuesLlonnalre
CompeLlLlve 8enchmarklng
CbservaLlon / SlLe vlslLs
LlLeraLure and Company
uocumenLaLlon 8evlew
7
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