chapter 4 Flashcards
A ________ implies a defined and consistent “bundle of output” as well as the ability to
differentiate one bundle of output from another.
product
In a manufacturing context, the concept is easy to understand and visualize.
Service firms
can also differentiate their products in a similar fashion using the various “models” offered by manufacturers.
For example, fast-food restaurants display a menu of their products, which are, of course,
highly tangible. If you are a burger connoisseur, you can easily distinguish Burger King’s
Whopper from its Whopper with Cheese, or from McDonald’s Big Mac
product
Providers of more intangible services, also offer various
“models” of products, representing an assembly of
carefully prescribed value-added supplementary
services built around a core product.
CREATING SERVICE PRODUCTS
For instance,
credit card companies develop different cards that each
comes with a distinct bundle of benefits and fees
insurance companies offer different types of policies
universities offer different degree programs, each
composed of a mix of required and elective courses.
CREATING SERVICE PRODUCTS
The objective of product development is to design
bundles of output that are distinct and can be easily
differentiated from another.
CREATING SERVICE PRODUCTS
All service organizations face choices concerning the types of products to offer and how to deliver them to customers. To better understand the nature of services, it’s useful to distinguish between the core product and the supplementary elements that
facilitate its use and enhance its value for customers.
CREATING SERVICE PRODUCTS
Designing a service product is a complex task that requires an understanding of how the core and supplementary services should be combined, sequenced, and delivered
to create a value proposition that meets the needs of target segments.
CREATING SERVICE PRODUCTS
Service performances are experienced rather than owned. Even when there are
physical elements to which the customer takes a title of ownership — such as a meal (which is promptly consumed), a surgically implanted pacemaker, or a replacement part for a car — a significant portion of the price paid by customers is for the value added by the service elements, including expert labor and the use of specialized
equipment.
service product
A _________________ comprises of all the elements of the service performance, both physical and intangible, that create value for customers.
service product
A _____________ comprises all the elements of the service performance, both physical and intangible, that create value for customers.
service product 1
The service concept is represented by: (3)
- Core Product
- Supplementary Services
- Delivery Process
The ____________ is “what” the customer is fundamentally buying.
Core product
product is the central component supplying the principal benefits and solutions that customers seek
core product
Examples:
When buying a one-night stay in a hotel, the core service is accommodation and security.
When paying to have a package delivered, the core service is for the package to
arrive at the correct address, on time, and undamaged.
core product
- Delivery of the core product is usually accompanied by a variety of other service-related activities we refer to collectively as ______________, which augment the core product, both facilitating its use and enhancing its value.
Supplementary Services
Note: Core products tend to become commoditized as an industry matures and competition increases. So the search for competitive advantage often emphasizes supplementary services, which can play an important role in differentiating and positioning the core product against competing services.
Supplementary Services
- The processes used to deliver both the core product and each of the supplementary services.
Delivery Processes.
The design of the service offering must address the following issues:
How the different service components are delivered to the customer.
The nature of the customers’ role in those processes.
How long delivery lasts. ?
The prescribed level and style of service to be offered.
Delivery Process
The _____________ consists of the core service and a range of supplementary
services.
Flower of Service
There are potentially dozens of different supplementary services, but almost all of them can be classified into one of the following eight clusters which are identified as either facilitating or enhancing that provide value to the core product.
Flower of service model
The petals are arranged in a clockwise sequence starting with “information”,
following the order they are likely to be encountered by customers.
BE FAMILIAR WITH THE FLOWER OF SERVICE MODEL
In a well-designed and well-managed service product, the petals and core are fresh and well-formed.
BE FAMILIAR WITH THE FLOWER OF SERVICE MODEL
A badly designed or poorly delivered service is a like a flower with missing, wilted, or discolored petals. Even if the core is perfect, the flower looks unattractive.
BE FAMILIAR WITH THE FLOWER OF SERVICE MODEL
Customers need relevant ———– to obtain full value from any good or service.
Direction to service site
Schedules/service hours
Price information
Terms and conditions of sale/service
Advice on how to get the most value from a service
Warnings and advice on how to avoid problems
Confirmation of reservations
Receipts and tickets
Notification of changes
Summaries of account activities
FACILITATING SUPPLEMENTARY SERVICES:
INFORMATION
Once customers are ready to buy, a key supplementary element comes into play —________________.
Order entry
On-site order entry
Mail/telephone/email/online/mobile app order
Reservations or check-ins
Seats/tables/rooms
Vehicles or equipment rental
Professional appointment
Applications
Memberships in clubs/programs
Subscription services (e.g., utilities)
Enrolment-based services (e.g., financial credit, college enrolment)
FACILITATING SUPPLEMENTARY SERVICES:
ORDER TAKING
_________ is the process of issuing invoices and collecting payments from customers. ________ can be:
- Periodic statements of account activity
- Invoices for individual transactions.
- Verbal statements of the amount due.
- Online or machine display of the amount due for self-payment transactions
- Portable wireless terminal.
- Self-billing, by which the customer tallies up the amount of an order and authorizes a card payment
FACILITATING SUPPLEMENTARY SERVICES:
BILLING
Note:
Customers usually expect bills to be clear and informative, and itemized in ways that make it clear how the
total was computed. Inaccurate, illegible, or incomplete bills risk disappointing customers who may, up to
that point, have been quite satisfied with their experience.
If customers are already dissatisfied, the billing mistake may make them even angrier.
Billing should also be timely, because it encourages people to make faster payments.
FACILITATING SUPPLEMENTARY SERVICES:
BILLING
is the voluntary transfer of money, equivalent, or other valuable items from one person to another in exchange for goods or services received or to meet a legal obligation. It includes:
FACILITATING SUPPLEMENTARY SERVICES:
PAYMENT
Inserting card, cash, or token into a machine, electronic funds transfer,
mailing a check, entering credit card information online, online payment systems such as PayPal, Google Wallet, or Bitcoins.
Self service
- Cash handling or change giving, check handling,
credit/charge/debit card handling, coupon redemption.
Direct to payee or intermediary-
- automated systems (e.g., machine-
readable tickets that operate entry gate, pre-arranged automatic deduction for bill payment through direct debit (e.g., for bank loans and post-paid cell phone subscription
plans)
Automatic deduction from financial deposits-
It involves a dialog to probe for customer requirements and then develop a tailored solution.
ENHANCING SUPPLEMENTARY SERVICES:
CONSULTATION
—————- consists of advice from a knowledgeable service person in response to the request: “What do you
suggest?” For example, you might ask your hairstylist for advice on different hairstyles and products.
ENHANCING SUPPLEMENTARY SERVICES:
CONSULTATION
Effective consultation requires an understanding of each
customer’s current situation, before suggesting a suitable
course of action. Examples of consultation include:
*Customized advice *Personal counseling * Tutoring/training
in service use * Management or technical consulting
ENHANCING SUPPLEMENTARY SERVICES:
CONSULTATION
________________ represents a more subtle approach to consultation because it involves helping customers to
better understand their situations so they can come up with their “own” solutions and action programs.
ENHANCING SUPPLEMENTARY SERVICES:
CONSULTATION
- Counseling
This approach can be a particularly valuable supplement to services such as health treatments, in which part of the challenge is to get customers to make significant lifestyle changes and live healthily.
ENHANCING SUPPLEMENTARY SERVICES:
CONSULTATION
- Counseling
- means extending a welcome to guests or offering a home away from home,
__________-related services should ideally reflect the pleasure of meeting new customers and
greeting old ones when they return. Well-managed businesses try, at least in small ways, to ensure
that their employees treat customers as guests. Courtesy and consideration for customers’ needs
apply to both face-to-face encounters and telephone interactions. Hospitality elements include:
* Greeting
* Food and beverages
* Toilets and washrooms
* Waiting facilities and amenities
– Lounges, waiting areas, seating
– Weather protection
– Magazines, entertainment, newspapers
* Transport
ENHANCING SUPPLEMENTARY SERVICES:
HOSPITALITY
_____________. When customers are visiting a service site, they often want assistance with their personal
possessions.
In fact, some customers may not visit at all unless certain safekeeping services are provided (such a safe and convenient parking for their cars).
Safekeeping includes caring for:
* Child care, pet care * Parking for vehicles, valet
parking * Coat rooms * Baggage handling * Storage
space * Safe deposit boxes * Security personnel
ENHANCING SUPPLEMENTARY SERVICES:
SAFEKEEPING
- involve supplementary services that fall outside the routine of normal
service delivery. - Astute businesses anticipate such exceptions and develop contingency plans and guidelines in advance. That way, employees will not appear helpless and unprepared when customers ask for special assistance. Well-defined procedures make it easier
for employees to respond promptly and effectively.
There are several types of
_____________:
* Special request
* Problem-solving
*Handling of complaints/ suggestions/ compliments
*Restitution
ENHANCING SUPPLEMENTARY SERVICES:
EXCEPTIONS
- Common requests relate to personal needs, including
The care of children
Dietary requirements
Medical needs
Religious observance
Personal disabilities
Special requests.
. Sometimes normal service delivery (or product performance) fails to
run smoothly as a result of an accident, delay, equipment failure, or a customer having difficulty in using a product.
Problem-solving
- This activity requires well-
defined procedures. It should be easy for customers to express dissatisfaction, offer suggestions for improvement, or pass on compliments, and service providers should be able to make an appropriate response quickly.
Handling of complaints/suggestions/compliments.
- is the act of making up for damages or harm. Many customers expect
to be compensated for serious performance failures. Compensation may take the form of repairs under warranty, legal settlements, refunds, an offer of free service, or other form of payment-in-kind
Restitution
Managers need to keep an eye on the level of exception requests.
Too many requests may indicate that standard procedures need revamping.
For instance, if a restaurant frequently receives requests for special vegetarian meals as there are none on the menu, it may be time to revise the menu to include at least one or two such dishes.
A flexible approach to exceptions is generally a good idea, because it reflects
responsiveness to customer needs. On the other hand, too many exceptions may compromise safety, negatively impact other customers, and overburden employees.
ENHANCING SUPPLEMENTARY SERVICES:
EXCEPTIONS
Strong brands enable customers to better visualize and understand intangible products.
They reduce customers’ perceived monetary, social, or safety risk in busying services,
which are difficult to evaluate prior to purchase. Strong brands are surrogates when the
company offers no fabric to touch, no trousers to try on, no watermelons or apples to
scrutinize, no automobile to test drive
by who_________–
Leonard Berry
can be employed at both the corporate and product levels by almost any service business. In a well-managed firm, the corporate brand is not only easily recognized but also has meaning for customers, representing a particular way of doing business
Branding
Applying distinctive brand names to individual products enables the firm to
communicate the distinctive experiences and benefits associated with a specific
service concept to the target market
branding
helps marketers to establish a mental picture of the service in customers’
minds and to clarify the nature of the value proposition.
Branding
individual service products helps to differentiate one bundle of output from
another.
Branding
BRAND STRATEGIES FOR SERVICES (4)
Most service organizations offer a line of products rather than just a single product.
Four broad branding alternatives:
1. Branded House
2. Sub-brands
3. Endorsed Brands
4. House of Brands
is used to describe a
company, such as the Virgin Group, that
applies its brand name to multiple offerings
in often unrelated fields.
Branded House.
Virgin’s core business areas are travel,
entertainment, and lifestyle, but it also
offers financial services, healthcare, media,
and telecommunications services.
Branded House.
Next on the spectrum are _______________, for which the corporate or the master
brand is the main reference point,
but the product itself has a
distinctive name too.
Sub-brands.
___________________
the product brand dominates but the
corporate name is still featured. Many hotel companies use this approach.
This model is great if you want to leverage the familiarity of the master brand, but at the same time you need some distinction among the variety of products you offer.
Endorsed Brands
this is where most consumers
don’t even know the master brand behind some of the famous products they use.
We’re just familiar with the many the brand we buy, like Gillette razors, Tide detergent or Old Spice deodorant. Greenwich, Chowking, Mang Inasal, Jollibee, Red Ribbon, Burger King, Dunkin Donuts, Hard Rock Café,
Tim Howan, Panda Express, etc.
House of Brands
In a number of service industries, branding is not only used to differentiate core services, but also to clearly differentiate service levels. This is known as________________. It is common in industries such as hotels, airlines,
car rentals, and computer hardware and
software support.
service tiering
is the value premium that comes
with a brand. It is what customers are willing to pay for the service, beyond what they are willing to pay for a similar service that has no brand.
Brand equity
is a marketing term that describes
a brand’s value. That value is determined by consumer perception of and experiences with the
brand. If people think highly of a brand, it has positive brand equity.
Brand equity
— mainly through advertising, service facilities and personnel.
Company’s presented brand
from word of mouth and publicity. These are outside of the firm’s control.
External brand communications
what the customer has gone through
when they patronized the company.
Customer experience with the company
— the ability to recognize and recall a brand when provided with a cue.
Brand awareness
what comes to the customer’s mind when a brand is mentioned.
Brand meaning
— the degree of marketing advantage that a brand has over its
competitors.
Brand equity
Intense competition and rising consumer expectations are having an impact on nearly all service industries. Thus, great brands not only provide existing services well, but also continuously improve through innovation and by creating new approaches to service. Firms
need to improve and develop new services to maintain a competitive edge
NEW SERVICE DEVELOPMENT
represent the simplest type of innovation, typically involving no changes in either processes or performance. However they often are highly visible, create excitement, and
may serve to motivate employees. Examples include redesigning retail branches, websites or
new uniforms for service employees.
Style changes
are the most common type of innovation. They involve small changes
in the performance of current products, including improvements to either the core product or to existing supplementary services. Often, it is the little things that matter and customers
appreciate it. For example, a hotel has a series of buttons where passengers can choose their music from a choice of garage, funk, and rhythm and blues. This is just a simple improvement that can add to a customer’s experience as it is unique and surprising.
Service improvements
take the form of adding new facilitating or enhancing service elements to an existing core service or significantly improving an existing supplementary service. Low-tech innovations for an existing service can be as simple as adding parking at a retail site or agreeing to accept payment via
smartphone for payment.
Supplementary service innovations
often represent distinctive new ways of delivering existing products. The intention is to offer more convenience and a different experience for
existing customers, or attract new customers who find the traditional approach unappealing. Often, they involve adding a lower-contact distribution channel to an
existing high-contact one, such as having self-service to complement delivery by
service employees, or creating online or app-based service delivery.
Process line extensions
are additions to a company’s current product lines. The first company in a market to offer such a product may be seen as an innovator. The others are
merely followers, often to defend themselves. These new services may be targeted at existing customers to serve a broader variety of needs or are designed to attract new customers with different needs, or both. For example, a restaurant may extend the product
line to offer dog lovers a menu as well, so both the owners and their dogs are able to dine in the same restaurant.
Product line extensions
consist of using new processes to deliver existing core products in new ways with additional benefits. For example, online courses are transforming
higher education by using cutting-edge technology,Internet,and smart devices.
Major process innovations
are new core products for markets that have not been previously defined. They usually include both new service characteristics and radical new
processes.
One example, is the Henn-na Hotel in Nagasaki, Japan is run by robots. It aims
to have 90% of hotel services provided by robots including porter service, room cleaning, front desk, and other services to reduce costs and ensure comfort. Many other processes were also redesigned such as using facial recognition to give access to the hotel, rooms, and
other facilities, effectively replacing cumbersome room card systems
Major service innovations
Consumer goods have high failure rates, with more than 90% of the 30,000 new products introduced each year ending in failure. Services are not immune to the high failure rates either.
For example, many banks have tried to sell insurance products in the hopes of increasing the number of profitable relationships with existing customers, but many of these product extensions
also failed.
There are various reasons for failure:
including not meeting a consumer need
Inability to cover costs from revenues
Poor execution. For example, a study in the restaurant business found a failure rate of about 26%
during the first year rising to close to 60% within three years.
ACHIEVING SUCCESS IN NEW SERVICE
DEVELOPMENT
ACHIEVING SUCCESS IN NEW SERVICE
DEVELOPMENT
Three factors contribute to most success: (3)
Market synergy
organizational factors
market research factors
The new product fits well with the existing image of the firm, its
expertise, and resources; it is better than competing products in terms of meeting customers’ needs, as the firm has a good understanding of its customers’ purchase behavior and receives
strong support during and after the launch from the firm and its branches.
Market synergy
There are strong inter-functional cooperation and coordination.
Development personnel need to be fully aware of why they are involved and of the importance of new products to the company. Before the launch, staff must understand the new
product and its underlying processes, as well as details about direct competitors.
Organizational factors
Detailed and scientifically designed market research studies are conducted early in the development process with a clear idea of the type of information to be obtained. A good definition of the product concept is developed before undertaking
field surveys.
Market research factors
