Chapter 4: Products and Services

Question 1

What is the definition of customer-oriented quality?

Answer 1

a product’s ability to fulfill a customer’s needs as much as possible

From this perspective, quality is the positive (over) fulfillment of customer requirements

Question 2

What does the product policy encompass?

Answer 2

Encompasses all decision-making criteria that relate to development of market-related performance.

Criteria in product design or an enterprise’s entire performance program:
1. The conception of the particular products, and
2. The conception of the product or services program

Question 3

What is the system of conception levels?

Answer 3

Has established itself for the design of products or of a product or services strategy

Question 4

What are characteristics of the core product?

Answer 4

Describes the actual need that should be satisfied (e.g. mobility is not a NEED. Saving time, coming from A to B is a need)

This can be different for the same products
(Example: shoes for dry feet for some target groups, fashion for another target group)

It is crucial to be guided by the core product when designing the basis product.

Question 5

What is the characteristic of a basic product?

Answer 5

Is the core element of either the physical design or the service chain
(Example: at a hairdresser’s salon = haircut, hotel = bed in the manifestation of a core product as a place to sleep)

Question 6

What does the expanded product include?

Answer 6

Includes every additional element of a product
==> usually it is a whole system of different physical performance components or service offers.
(Example: Hotel it is the room including the offers of TV, WiFi, bathroom, possibly with whirlpool)

Question 7

What does the augmented product include?

Answer 7

Includes additional service elements that enhance the good’s or service’s value,
(Example: a nice sitting area or individual room service)

Question 8

What does the potential product include?

Answer 8

Includes all goods or services available to a customer for potential use
(Example: the wellness center or business center of a hotel)

Question 9

What does the product levels show?

Answer 9

Product levels show that from a product view, the boundaries between physical goods and services blur. (A physical performance element such as a bathtub is a source of services (bathing, relaxing)

Question 10

What is the definition of service-dominant logic?

Answer 10

the conviction that marketing of all products, including physical products has to be designed in the sense of service marketing is establishing-

In this logic, Services are often rated as ultimate marketing objectives in the sense of problem solutions.

Question 11

What is one key difference between physical product manufacturing and service provision?

Answer 11

One key property of services is that the service provision (e.g. a haircut) coincides with the service consumption.
==> the quality of this service is often determined by the experince during service provisoin (e.g. the experience during a flight)
As a result, one is drawn to the conclusion that product design and performance should be discussed together.

Question 12

What does the change of marketing depend on?

Answer 12

• on the core product one starts with
• treating product primarily as a physical performance (and thus a storable unit) or as a service
• whether one operates on a B (producer) or C (end-customer) market

==> Different focuses in product design and marketing as a whole derive from the type of good or service

Question 13

What is the definition of a product?

Answer 13

“something that is fit for the satisfaction of a need or the fulfillment of a desire”.
==> a marketable good or service that creates a benefit for an end customer.

Question 14

Which strategies are there if a company is successful with their product to grow their company?

Answer 14

• some successful companies adhere to one basic product
• If there is a decision to change the goods and services program, there can be an
  ==> expansion or narrowing (in depth of range or breadth of range) or a fundamental structural change (a shift in emphasis or product variation)

Question 15

When a company wants to expand or narrow down, they have two directions they can go with their product variation.
Which two are they and what do they mean?

Answer 15

Depth of range
How many goods and services are provided for the solution of an identical problem

Breadth of range
How many types of goods and services are provided for different problems

Question 16

If a company wants to expand in their breadth of range, they can choose between three directions which are they?

Answer 16

Vertical diversificatoin
==> including new products along the added-value chain or into a product system
(e.g. if a ski manufacturer also operates a skiing area)

Horizontal diversification
fundamentally new products on the same performance level
(e.g. when tennis rackets or even surfboards are included in the range of products in addition to skis

Lateral diversification
fundamentally new product areas
(e.g. if a ski manufacturer offers life insurance)

Question 17

What is it called, if a company expands their depth of range?

Answer 17

Product differentiation

Question 18

What is it called if a company narrows down their depth of range?

Answer 18

Standardization

Question 19

What is it called when a company narrows down their breadth of range?

Answer 19

Specialization

Question 20

What is the definition of Performance processes?

Answer 20

Performance processes start from preparatory work and lead, via transformation (for material performance) or delivery to customers or their objects (for services), to performance marketed in the sales market

Question 21

What are three characteristics of performance processes?

Answer 21

• they depend on product properties and on the industry
• they have a physical process level (e.g. installation, assembly etc.) and an informational level (e.g. implementation of customer wishes)
• they are closely connected with the customer process and is triggered by customer requirements.
  Finally customer satisfaction is the ultimate goal of the process

Question 22

What does Efficiency mean? What need does it represent?

Answer 22

Efficiency = do things right

Need for cost-quality optimization

Question 23

What does effectivity mean? What need does it represent?

Answer 23

Do the right things

Need for strategic focus

Question 24

In what ways is the customer the catalyst for performance for a relevant target group?

Answer 24

Either directly and personally
==> as an initiator of a specific product category

Or latently and impersonally
==> e.g. in the form of a changing need that market research has identified

Question 25

How does the performance process work?

Answer 25

The performance process ranges from the explicit or latent customer enquiry to order clarification, construction or design to work preparation. This is then followed by procurement from suppliers, production, assembly and shipping, and finally, to end-customer service (e.g. the completion of the whole train, that closes the circular flow)

Question 26

What does design thinking methodically include?

Answer 26

Design thinking methodically includes: - thinking from the product outward as an independent and important approach to the whole business process. - Developing methods for promoting innovation in companies, based on strong customer orientation and by building prototypes among other things

Question 27

What does a performance process start and end with?

Answer 27

Performance lead from intermediate goods and services via transformation (with physical goods) or via performance on customers or their objects (for services) to goods and services sold on markets. --> the basic structure of performance processes thus starts with input and leads to output via throughput.

Question 28

What is the added value?

Answer 28

The added value created by the company is the difference between the vlaue of the input and the value of the output.

Question 29

Which requirements does the performance process have to meet?

Answer 29

The performance process has to meet the requirements of efficiency (do something right in the sense of high quality and reasonable cost) and effectiveness (do the right thing in the sense of the right products in terms of sustainablity and quality for customers and users)

Question 30

During the performance process, what is the focus at the strategic level?

Answer 30

Focus at the strategic level: determining the output range Meaning: what goods and services a company provides (determining the provisions of added value or goods and services ==> production breadth and production depth)

Question 31

What are the starting points for the strategic decision?

Answer 31

- Customer needs - Company internal and external resources - Strategic behavior of compatitors.

Question 32

What are the possible roles of a company in a value chain?

Answer 32

Layer Player Model Market Maker Model Integrated Model Orchestral Model

Question 33

What is the layer player model?

Answer 33

Be responsible for one step of the value chain E.g.: A chip company that only produces chips for several computer firms

Question 34

What is the Market Maker Model?

Answer 34

a company or organization that connects buyers and sellers. They act as a middleman or facilitator to enable transactions but typically don’t own the product or service being traded

Question 35

What is the integrated Model?

Answer 35

Do and produce everything yourself

Question 36

What is the orchestral Model

Answer 36

Rely on outsourcing solely

Question 37

What are economies of scale?

Answer 37

A size-conditioned reduction of performance's average costs through specializing E.g. Assembly line production at Ford motor company

Question 38

What are economies of scope?

Answer 38

Synergies resulting from efficiency and costs and quality advantages during an increase in performance breadth) E.g. production (and sales) of product variants at Swatch; production of both skimmed milk and butter at Emmi

Question 39

What do these two economies generate?

Answer 39

A company exists in an area of tension between the priorities of those two economies. These two economies generate a certain target conflict.

Question 40

What are economies of learning?

Answer 40

Reducing the cost per piece because you are getting better and more efficient at it. E.g. Healthcare (therefore: required min. no. of cases for surgeries)

Question 41

What are economies of networks (Network economies)

Answer 41

Production-side: decreasing marginal cost Demand-side: increasing marginal utility occur when the value of a product or service increases as more people use it. It’s a powerful concept in economics and business that drives growth in many modern platforms and technologies.

Question 42

What influences the decision of the product range?

Answer 42

How broad a company's product range should be depends mostly on the costs for expanding the horizontal range. These include: - Costs for different product versions - Planning complexity costs - Etc. Ultimately, a company's resources (production facilities, competencies) define costs. In addition, the breadth of range depends on customer's willingness to pay for individualization and thus on the demand structure and on competitor's behavior.

Question 43

What does the vertical business area pertain?

Answer 43

The vertical business area pertains to which goods and services should be produced inside the enterprise and which should be outsourced.

Question 44

What is the advantage and the disadvantage of producing more goods and services inside the company?

Answer 44

+ Reduction in transaction cost - Costs of hierarchical coordination within the organization

Question 45

What are the disadvantages and advantages of outsourcing?

Answer 45

+ Concentration on core competencies - New dependencies from handover to supplier

Question 46

Which steps have to be considered in operational decisions

Answer 46

Input Planning of the requirements of production factors ==> Material disposition Throughput Planning the implementation ==> Capacity management Output Planning the production range ==> Range management

Question 47

What does the operational performance process pertain?

Answer 47

Pertains to the decisions of which goods and services should be produced when and how.

Question 48

What is the operations research method?

Answer 48

Standardized planning tools in virtually every industry for the production and planning often build on the operatins research method. The starting point for planning reduction and controlling is the decision about a type of business.

Question 49

Production planning (especially work preperation and work controlling) is strongly influenced by the type of business: How does it look like in industrial production?

Answer 49

High degree of individualization, flexible production scheduling.

Question 50

Production planning (especially work preperation and work controlling) is strongly influenced by the type of business: How does it look like in Artisan production?

Answer 50

Small-scale production, traditional technique, attention to detail

Question 51

Production planning (especially work preperation and work controlling) is strongly influenced by the type of business: How does it look like in a Publishing company system?

Answer 51

Whole company is a cluster of contracts for the purchase of intermediate goods and services, production and distribution. Independent companies provide decentralized goods and services.

Question 52

What are the advantages of physical production compared to service provision?

Answer 52

Customers hardly notice outsourcing if it is done in a way that is technically competent Intermediate and end products can be stored and At the end of production, products can be checked for quality before they reach the customer.

Question 53

What does the equation for determining the optimal order quantity look like?

Answer 53

Q = Wurzel von average * F * S over C * P Q = optimum amount for each order (in pcs.) F = Annual demand in units (e.g. 400 pcs) S = Costs per order/retooling (e.g. CHF 20) C = Storage costs in % (e.g. 20% for cooling) P = Purchasing price per unit (e.g. CHF 5/pc)

Question 54

What is the definition of service?

Answer 54

An act that is performed on a human being or an object without the transformation of material goods

Question 55

What is a service product?

Answer 55

If the service (possibly in combination with physical goods) is able to generate a benefit for the customer, one can speak of a service product

Question 56

What is the benefit of a service product most of the time?

Answer 56

With modern service products, this benefit is often a contribution to the desired self-concept, mostly on the basis of: - A problem solution (e.g. integrated risk insurance) - Wellbeing (e.g. health service) - An experience (e.g. leisure service) and - A physical or psychological development and transformation of the individual (e.g. education, project therapy, style advice)

Question 57

What are features of a service? And what are the consequences for producers and consumers?

Answer 57

- Intangibility (no transformation of goods) ==> Non-transparency of the service, no transfer of title, increased risk for customers - Principle of uno actu (congruence of consumption and production; service is provided on the customer or its property) ==> Involvement of the customer (e.g. physical presence), lack of storage capability/transcience, Harmonization of supply and demand - Heterogenous service i.e. dependent on external factor ==> Individual unpredictable quality: need for quality management, measures to manage customers and co-customers - Significance of personal contact ==> Promotion of quality of interaction, quality management

Question 58

Which features of servies are the starting point of every

Answer 58

Intangibility and the conguence of consumption and production that are defined by the nature of the product or service, as well as the dependence on an external factor and the significance of personal contact From the starting point follow secondary features which lead to consequences for producers and consumers

Question 59

What are the features and risks due to intandibility?

Answer 59

- A certain non-transparency of the service results from intangibility. The service cannot be tested in advance. (e.g. during booking one does not know how well one will sleep in a hotel) - The feature of a service not representing a title (property) ==> the services reputation and use of a brand can be transferred by a licese agreement for example A high risk for the customer during purchase is a consequence of the non-transparency and the lack of property rights to a product that cannot re-sell at best pass on as a gift ==> the challenge for service management is reducing the insecurity for example through confidence-building brands, communication or materialization of quality (e.g. spacious bank lobbies that communicate security etc.)

Question 60

What does the congruence of consumption and production require?

Answer 60

The congruence of consumption and production always requires the presence of the customer. They have to at least be physically present to receive the service. Example car: If the service is performed on a car, the vehicle has to be takes to the service location at the agreed time.

Question 61

What is meant with "services are dependent on external factors"?

Answer 61

Many see dependence on the "external factor" as one of the essential features of services. In a service process it is often the involvement of customers and co-customers that is understood by dependence on an external factor All services posit a more or less strong involvement of the customer - Customers have to go to the service location, - make preparations (e.g. brush their teeth before a dentist appointment) participate in the service process (e.g. in a self-service restuarant) - or ensure a subsequent performance (e.g. participation in therapy after an operaion.) In addition co-customers influence the atmosphere for example the atmosphere on a flight

Question 62

What is the significance of personal contact in services?

Answer 62

A large number of services require personal contact between the service-provider and the customer. Even abstract services include personal contact, at the latest during a critical incidence. Example: Customer complaints in a call center. The autonomous competent peresonal interaction has special relevance for quality because a superior cannot supervise the service provider (e.g. an operating doctor, a teacher during lessons) during a service provision. Additional performance dimensions like the emotional aspect of social interaction arise during personal contact. As core performances harmonize, these qualities will take on greater significance

Question 63

What does the Demarcation between service and material good mean?

Answer 63

There are smooth transitions between material goods and services. ==> an absolute boundary between services and physical products thus hardly exists. The classification of companies and products can therefore only be an approximate demarcation based on the focus of the performance contents

Question 64

What is the relationship between result of the service and the process experience?

Answer 64

The result of the service and the process experience are quality-related dimensions that can partly balance one another. If for example the result of the service (haircut) is not very good but the process (the service) was excellent, the customer is still satisfied with the overall service.

Question 65

Why is the service chain model of great significance?

Answer 65

During performance design and control, one has to consider that quality cannot be delegated to an end control. Every single element of a service and the experience as a whole contributes to quality perception. Some elements are especially critical - Such as the start of a service process (the first impression counts) - And the end of the service process Due to the significance of the performance process in perceived quality, the service chain model is especially important

Question 66

What is the definition of a service chain?

Answer 66

A service chain describes a service as a process with a sequence of activities that the cusotmer or object passes through

Question 67

How many service chains are there in a non-variable service?

Answer 67

In the case of a non-variable service (e.g. an administrative act like the issue of an approval) there is only one service chain.

Question 68

What is a service network?

Answer 68

In the case of a service network (e.g. in the health or leisure sector), there is a service chain for every respective customer, because they all activate their service sequence by their individual demand inside a service network.

Question 69

How can service chains be structured?

Answer 69

Service chains can be structured in sequence diagrams with varying degrees of accuracy. ==> These different levels of detail enable different depths of viewing service sequences

Question 70

What is an integrated service design?

Answer 70

An increasingly important element of service design is so-called integrated service design Service design means the integrated coordination of service chains, customer information and the physical design or tangibilization.

Question 71

What are information and visibility lines?

Answer 71

It is important to define so-called information and visibility lines from the customer's perspective In the context of service design one has to determine what the guest is supposed to see or what should be done beyong the visibility line and also what information the guest should receive.

Question 72

What is a prosumer? What are benefits of prosumers?

Answer 72

In many service concepts the customer performing specific sub-services himself is part of the overall experience. The customer becomes a "prosumer". ==> This re-delegatoin of services to the customer cuts costs, for example when customers clear up after themselves or carry files from one office to another. It also enables an enhancement of the service quality perceived by the customer because he experiences benefits like: - Higher self-determination e.g. regarding choice or service intensity - Higher authenticity thanks to an individual appreciation of the service co-created

Question 73

What are moment of truths?

Answer 73

Another important element is personal interaction (moment of truth) between service customer and service producer. Service actions performed by people can be measured on a scale between purely technical and interactive activities. Physical activities often involve the intersection of human and machine, for example activities in a call center, clearing up dishes in a restaurant or scanning articles in a supermarket. On the other hand, interactive service contacts are more important in holistic-experience services or problem solving, for example sports lessons, personal tours at a tourist attraction or consulting.

Question 74

What is identity?

Answer 74

Even though the quality of personal interaction is important for all functions of interpersonal contacts, communicating identity is especially important for service contacts. Simply put: identity can be defined as an individual's or a collective's ability to view itself as autonomous and causative and thus different from it s environment. Social interaction makes it possible to experience differences or similiarities with the environment Particularly in a service context, a counterpart's action can be triggered in the context of interaction, for example if someone orders something or receives an order from a service provider. ==> One can experience causality.

Question 75

What is an extended service chain?

Answer 75

An extended service chain is suitable for representing the service expereince from the customer's perspective. Often a service customer is a regular buyer. The conclusion of one service act leads to the next within the customer buying cycle. The customer sees everything that happens in front of the visibility line. However, this perception is influenced by interactions, design etc.

Question 76

What are service blueprints?

Answer 76

Detailed service chains depciting production-relevant factor the customer may not be able to see, like outsourcing, information processes etc. can be called service blueprints.

Question 77

What questions are asked on a strategic level about the production of physical products?

Answer 77

On a strategic level, the same questions arise with the production of physical products: - Questions about service breadth (different kinds of service chains) - Questions about service depth (which elements of the service chain should be provided by the company)

Question 78

Which two topics have special significance on the operational level?

Answer 78

1. Production and demand control 2. Employment of service providers for direct customer contact

Question 79

Employment of service providers for direct customer contact comes with special empowerment of employees. Management's supervision is no longer possible. Which important preconditions for this empowermenet are included here?

Answer 79

- Being embedded in a service culture that outlines both the characteristics features and limits of the service (What do we decline to do for customers even if they ask for it?) - Suitable tools and work equipment, especially database and software for the increasing number of information-based services - Managmenet's confidence-based leadership and support of the service employee in direct customer contact. Often, one proceeds from the ideal image of an upside-down pyramid ==> in this way, management is a "supporter" of the "team" providing good and services through direct customer contact.