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Creating the

Service Product

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Key Steps in Service Planning: Matching Opportunities to Resources

Must relate marketing opportunities to firms resources


Identify, evaluate firms marketing assets
(physical, financial, technological, human)
Customer portfolio/lifetime value (customer equity) Market knowledge Marketing implementation skill Product line Competitive positioning strategies Brand reputation (brand equity)

Identify, evaluate firms operating assets

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

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

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

User costs/outlays incurred Price/other monetary costs Time Mental and physical effort Neg. sensory experiences

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

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The Augmented Product

Most firms offer customers a package of benefits:


core product (a good or a service) supplementary services that add value to the cores

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- 5

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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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- 7

New Service Development

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4- 8

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- 9

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) - Industrial Equipment
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
Drive own car

Rent the Use of a Physical Good

Perform the Work Oneself

Rent car and drive it


Rent word processor

Type on own word processor

and type

Hire Someone to Do the Work

Hire chauffeur to

drive car
Hire typist to use

Hire a taxi or limousine Send work to secretarial service

word processor

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

4 - 11

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 - 12

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

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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

4 - 14