8/2/2019 SM Lecture 4
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www.bradford.ac.uk/management
Session 4
Developing service concepts
By
Dr Mei-Na Liao
8/2/2019 SM Lecture 4
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Learning Objectives
To understand the concept of core andsupplementary services
To understand the process of service
creation To understand the concept of service
branding
To explore the issue relating to servicesinnovation and new servicesdevelopment
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Value Added by Tangible vsIntangible
Elements in Goods and Services Shostack (1977)
Fast food restaurantPlumbing repair
Office cleaningHealth club
Airline flight
Retail banking
Insurance
Weather forecast
Salt
Soft drinks
CD PlayerGolf clubs
New carTailored clothing
Furniture rental
LoHi
Hi
TangibleElements
Intangible Elements
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Aspects of servicesShostacks model of service components
(example theatre visit)
COREVisit totheatre
Support
equipment
Ticketreservation
Props etc
Performance
Fooddrink
Delivery
method
Building
Atmosphere
Tangible
Intangible
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The nature of the service offering
The design of a service offering mustaddress and integrate three keycomponents:
Core product
Supplementary Services
Delivery process
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Core Products andSupplementary Services
Most firms offer customers a package of benefits:
core product (a good or a service)
supplementary services that add value to thecore
In mature industries, core products often becomecommodities
Supplementary services help to differentiate coreproducts and create competitive advantage by:
facilitatinguse of the core service
enhancingthe value and appeal of
the core service
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Delivery Process
This element deal with the procedures used todeliver both the core product and each of thesupplementary services.
Flowcharting can be used to illustrate thedelivery process, offers a excellent way tounderstand the customers experience and
identify the many type of supplementary servicesaccompanying a core product
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Core and Supplementary Product Design:What Do We Offer and How Do We Create and Deliver It?
Core
Scheduling Process
Service
Level
Customer
Role
Supplementary
services offeredand how createdand delivered
Delivery Concept
For Core Product
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Core and Supplementary Services in a Luxury Hotel(Offering Guests Much More than a Cheap Motel!)
Reservation
ValetParking
Reception
BaggageService
CocktailBar
RestaurantEntertainment/
Sports / Exercise
Telephone
Wake-upCall
RoomService
Business
Center
Cashier
A Bed for theNight in an
Elegant PrivateRoom with a
Bathroom
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The Time Dimension in the Augmented ServiceProduct
What Happens, When, and in What Sequence?
PreVisit
Reservation
USE GUESTROOM OVERNIGHT
Parking Get car
Check in
Porter
USE ROOM
MealPay TV Room service
Phone
Check out
Time Frame of an Overnight Hotel Stay(real-time service use)
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The flower of service
Core
InformationConsultation
Order
Taking
Hospitality
SafekeepingExceptions
Billing
Payment
The flower of service:Core product surrounded by cluster of supplementary services,Adopted from Lovelock & Writz (2004) p.103
Enhancing
services
Facilitatingservices
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Exceptions
These involve supplementary services that fall outside
the routine of normal service delivery
Special requests
Problem solving
Handling of complaints/suggestions/compliments
Restitution (compensation)
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Implications
An integrated approach must be taken when design aservice offering, any mis-management or ill designedof the three key complements will affect the quality of
the service.
In a well designed and well managed serviceorganisation, the petal and core are fresh and wellformed. A badly designed or poorly executed service
is like flower with missing, wilted, or discolouredpetals. Even if the core is perfect the overallimpression of the flower is unattractive.
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Main issues- when deciding the Core andSupplementary Elements of a Service Product
How is our core product defined and what supplementaryelements currently augment this core?
What product benefits create the most value for customers?
Is our service package differentiated from the competition inways that are meaningful to target customers?
What are current levels of service on the core product andeach 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?
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Corporate brand vs.
Product/service brand
Corporatebranding
Individual product/service branding
Branded house Subbrands Endorsed brands
House of Brands
e.g.BA, Virgin,HSBC bank
Marriott Group
e.g.BA-Club worldVirgin airline,
music etc
e.g.Ritz-Carlton-MarriottFirst Direct - HSBC
e.g.
Yum! Brands Inc.(KFC, Pizza Hut, Taco Bell etc.)
Corporate Branding- communicate recognizable brand, meaning forcustomer and stands for a particular way of doing business (e.g. Virgin,BA, Easy.com, Google, HSBC etc.)Product/service branding communicate a to the target market thedistinctive experiences and benefit associated with a specific service
concept.
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Branded customer experienceCustomers experience is shaped in a specific and meaningful way
2.Understand targetcustomers value
1.Segmentby behaviour
3. Create a
brand promise
4.Differentiatedcustomer experience
5.Give employees skills, tools
and supporting process
8. Measure andmonitor forconsistency
6 everyone is a
brand manager andsupporter
7. Make promise that
your process can exceed
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Hierarchy of New service categories
Major service innovations new core products for markets
Major process innovations using new processes to deliver existing coreproducts in new ways with additional benefits (e.g. online retailing,Amazon).
Product line extensions-additions o current product lines by existing firms.(BT-broadband & TV, TESCOInsurance, post office -broadband)
Process-line extensions- represent distinctive new ways of delivery existingservices/products. (Lloyds TSB online banking,)
Supplementary service innovations- add or improve supplementary service.(adding entertainment in a caf, shopping centre, The Post office provide24/7 online tracking of parcel delivery)
Service Improvement make improvement on current core orsupplementary services.
Style changes- involve no changes in process or performance but highlyvisible change of appearance (colour schemes of showroom, vehicles, staffuniforms, new design of invoice or letter hand etc.)
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Why do new services often fail?
90% of 30,000 new products introducedeach year fail, services are not exception!(e.g. the failing of dot.com)
Main reason:
Not meeting a demonstrable consumer need
Inability to cover costs from revenues
Poor execution
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Success in developing New
services The core product is of secondary important, the
total service offering and the marketing supportthat goes with it is vital. (Storey & Easing wood,1998)
Edgett &Parkinson (1994) identify three factorscontribute to success: Market synergy fit with the existing image of the firm
and position.
Organisational factors importance of servicepersonnel, efficient co-ordination in the deliveryprocess
Market research factors, (Involving user in theprocess)
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Revision questions
Use Flow of Services model to illustratea service offering that you are familiarwith and discuss how it should be
managed to delivered promised benefitto customer.
Discuss what a branded experience
mean and how can it be achieved. Useexamples to support your answer.