Chapter 4

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 firm¶s resources
(physical, financial, technological, human)  Identify, evaluate firm¶s 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 firm¶s 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 .

and post-flight service KEY In-flight service 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 4.Shostack¶s Molecular Model of a Total Market Entity . 4-2) Distribution Price Service frequency Vehicle Transport Pre.Passenger Airline Service (Fig.5 .

6 . core products often become commodities  core product (a good or a service)  supplementary services that add value to the core  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.Core Products and Supplementary Services  Most firms offer customers a package of benefits:  In mature industries.

7 .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.

should we cut service levels and charge less? Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4.8 .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? each of the supplementary elements?  What are current levels of service on the core product and  Can we charge more for higher service levels on key attributes (e. easier access. superior caliber personnel)?  Alternatively. more staff.g.. faster response. better physical amenities.

9 .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 Room Service Wake-up Call Telephone Baggage Service Cocktail Bar Restaurant Entertainment/ Sports / Exercise Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4.

10 . 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 .What Happens.

11 . 4-5) Information Payment Core Consultation Billing Order-Taking Exceptions KEY: Hospitality Safekeeping Facilitating elements Enhancing elements Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 .The Flower of Service: Categorizing Supplementary Services (Fig.

12 .Information (Table 4.Facilitating Services .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 .

Facilitating Services .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 .Order-Taking (Table 4.

3) Core ³How much do I owe you?´ Customers deserve clear.Billing (Table 4.14 . accurate and intelligible bills and statements Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 .Facilitating Services .

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 .Payment (Table 4.15 .Facilitating Services .

16 .Enhancing Services .5) Core Value can be added to goods and services by offering advice and consultation tailored to each customer¶s needs and situation Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 .Consultation (Table 4.

Hospitality (Table 4. marketing invited them there!) Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 .Enhancing Services .17 .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.

Safekeeping (Table 4. 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 .Enhancing Services .18 .7) Core Customers prefer not to worry about looking after the personal possessions that they bring with them to a service site.

Enhancing Services .Exceptions (Table 4.8) Core Customers appreciate some flexibility in a business when they make special requests.19 . They expect it when not everything goes according to plan Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 .

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  Courtyard by Marriott  Fairfield Inns  Residence Inns  SpringHill Suites  TownePlace Suites  Marriott Vacation Clubs  British Airways Brands Intercontinental  First  Club World  World Traveller Plus  World Traveller European  Club Europe  Euro-Traveller UK Domestic  Shuttle 4 .21 International Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E .

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 .Branding a High-Tech.

Sun Spectrum Support: Sub-branding Highlights Four Service Levels Sub-branding clarifies service levels offered at different fees  Platinum: ³Mission Critical´ On-site service 24/7. two-hour response. parts replacement by courier Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 . additional services available  Gold: ³Business Critical´ Onsite service Mon-Fri 8am-8pm. telephone support 24/7. four-hour response. onsite parts replacement. four-hour response. telephone support 24/7. telephone support Mon-Fri 8am-8pm. onsite parts replacement  Bronze: ³Self Support´ Phone support Mon-Fri 8am-5pm.23 . onsite parts replacement  Silver: ³Basic Support´ Onsite service Mon-Fri 8am-5pm.

New Service Development Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 .24 .

25 .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 .

26 .New Service Development: Physical Goods as Source of Service Ideas  Customers can rent goods²use and return for a fee² instead of purchasing them rented equipment  Customers can hire personnel to operate their own or  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 4 .

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 .Creating Services as Substitutes for Owning and/or Using Goods (Fig.27 .

28 . pay Drive away. take food Eat Home Catering Arrange to meet caterer Plan meal. give address Driver rings doorbell Pay driver. pay Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 . 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 deposit Food and staff arrive Meal is prepared and served Eat Staff cleans up.Service Development through Delivery Options: Alternative Meal Service Formats (Fig. eat later Telephone Restaurant Order food. 4-8) Fast-Food Restaurant (Eat In) Drive-In Restaurant (Take Out) Home Delivery See sign Park and enter Order meal.

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.29 . reception)  Leisure facilities  Security²people/systems Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 ..

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 .30 .Success Factors in New Service Development  Market synergy  Good fit between new product and firm¶s image/resources  Advantage vs.