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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)

 Identify, evaluate firm’s 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 Operating Assets


(Customer Base, Mkt. Knowledge, (Facilities/Equipment, IT Systems,
Implementation Skills, Brand Reput.) People, Op. Skills, Cost Structure)

Service Marketing Concept


Service Operations Concept
•Benefits to customer from core/
supplementary elements, style, •Nature of processes
service level, accessibility •Geographic scope of ops
•Scheduling
•User costs/outlays incurred •Facilities design/layout
•Price/other monetary costs •HR (numbers, skills)
•Time •Leverage (partners, self-service)
•Mental and physical effort •Task allocation: front/backstage
•Neg. sensory experiences 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
Shostack’s Molecular Model of a Total Market
Entity - Passenger Airline Service (Fig. 4-2)

Distribution
Price

Vehicle
Service
frequency

Transport In-flight
service
Pre- and
post-flight Food
service and
drink
KEY
Tangible elements
Intangible elements
Marketing Positioning
(Weighted toward evidence) Source: Shostack

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4- 5
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 Delivery Concept


services offered For Core Product
and how created Scheduling Process
and delivered

Core

Service Customer
Level 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!)

R e s e r v a t io n
C a s h ie r V a le t
P a r k in g
B u s in e s s
C e n te r R e c e p t io n

A B e d fo r th e
Ro o m N ig h t in a n Ba gga g e
S e r v ic e E le g a n t P r iv a t e S e r v ic e
R o o m w it h a
B a th ro o m
W a ke -u p C o c k t a il
C a ll Ba r

Te le p h o n e R e s ta u ra n t
E n te r ta in m e n t /
S p o r t s / E x e r c is e

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 Get car

Check in Check out


USE ROOM Phone

USE GUESTROOM OVERNIGHT

Porter

Pay TV Room service


Meal

Pre Time Frame of an Overnight Hotel Stay


Visit (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 Consultation

Billing Core Order-Taking

Exceptions Hospitality
KEY:
Facilitating elements Safekeeping
Enhancing elements

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 11
Facilitating Services - Information
(Table 4.1)

Customers often require


information about how to
obtain and use a product or
Core 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)

Many goods and services


must be ordered or reserved
in advance. Customers need
Core
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)

“How much do I owe you?”


Customers deserve clear,
Core
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)

Customers may pay faster


and more cheerfully if you
Core
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)

Value can be added to


goods and services by
offering advice and
Core
consultation tailored to
each customer’s
needs and situation

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 16
Enhancing Services - Hospitality
(Table 4.6)

Customers who invest time


and effort in visiting a
business and using its
Core 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)

Customers prefer not to


worry about looking after
the personal possessions
that they bring with them
Core
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)

Customers appreciate some


flexibility in a business
when they make special
Core 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  British Airways Brands


 Marriott Hotels Intercontinental
 Marriott Resorts  First
 Club World
 Courtyard by Marriott
 World Traveller Plus
 Fairfield Inns  World Traveller
 Residence Inns
European
 SpringHill Suites  Club Europe
 TownePlace Suites  Euro-Traveller
 Marriott Vacation Clubs UK Domestic
International  Shuttle

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 21
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 goods—use 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 4 - 26
Creating Services as Substitutes for
Owning and/or Using Goods (Fig. 4-7)

Own a Physical Good Rent the Use


of a Physical Good

• Drive own car • Rent car and drive it


Perform the
• Type on own word processor • Rent word processor and type
Work Oneself

Hire Someone • Hire chauffeur to drive car •• Hire a taxi or limousine


to Do the Work • Hire typist to use word processor •• 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 See sign Park and Order meal, Pick up Find table Clear table
(Eat In) enter and pay meal and eat and leave

Drive-In See sign Stop car at Order via Get meal at Drive away,
Restaurant order point microphone pickup, pay eat later
(Take Out)

Home Telephone Order food, Driver rings Pay driver,


Delivery take food Eat
Restaurant give address doorbell

Home Arrange to Plan meal, Food and Meal is Staff cleans


Catering meet caterer pay deposit staff arrive prepared Eat up; pay
and served

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
 Security—people/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 firm’s 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 - 30

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