Chapter 4 New Service Development

Learning Objectives New service development process. Service blueprinting. Dimensions of divergence and complexity. Taxonomy of service processes. Generic approaches to service system design.

Levels of Service Innovation I. Radical Innovations Major Innovation Start-up Business New Services for the Market Presently Served II. Incremental Innovations Service Line Extensions Service Improvements Style Changes

Technology Driven Service Innovation Power/energy Physical design Materials Methods Information

Service Design Elements Structural - Delivery system - Facility design - Location - Capacity planning Managerial - Service encounter - Quality - Managing capacity and demand - Information

New Service Development Cycle Full-scale launch Post-launch review Full Launch Development Enablers Formulation of new services objective / strategy Idea generation and screening Concept development and testing Organizational Context People Service design and testing Process and system design and testing Marketing program Personnel training Service testing and pilot run Test marketing Teams Product Technology Systems Tools Analysis Design Business analysis Project authorization

Service Blueprint of Luxury Hotel

Strategic Positioning Through Process Structure Degree of Complexity Measured by the number of steps in the service blueprint. (clinic vs. hospital) Degree of Divergence Amount of discretion permitted the server to customize the service. (attorney vs. paralegal)

Structural Alternatives for a Restaurant LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS HIGHER COMPLEXITY/DIVERGENCE TAKE RESERVATION SEAT GUESTS, GIVE MENUS SERVE WATER AND BREAD TAKE ORDERS PREPARE ORDERS Salad (4 choices) Entree (15 choices) Dessert (6 choices) Beverage (6 choices) SERVE ORDERS COLLECT PAYMENT No Reservations Self-seating. Menu on Blackboard Eliminate Customer Fills Out Form Pre-prepared: No Choice Limit to Four Choices Sundae Bar: Self-service Coffee, Tea, Milk only Serve Salad & Entree Together: Bill and Beverage Together Cash only: Pay when Leaving Specific Table Selection Recite Menu: Describe Entrees & Specials Assortment of Hot Breads and Hors D’oeuvres At table. Taken Personally by Maltre d’ Individually Prepared at table Expand to 20 Choices: Add Flaming Dishes; Bone Fish at Table; Prepare Sauces at Table Expand to 12 Choices Add Exotic Coffees; Sherbet between Courses; Hand Grind Pepper Choice of Payment. Including House Accounts: Serve Mints

Taxonomy of Service Processes Low divergence High divergence (standardized service) (customized service) Processing Processing Processing Processing Processing Processing of goods Information of people of goods Information of people Dry Check Auto repair Computer No Cleaning processing Tailoring a programming Customer Restocking Billing for a suit Designing a Contact a vending credit card building machine Ordering Supervision Indirect groceries of a landing customer from a home by an air contact computer controller No Operating Withdrawing Operating Sampling Documenting Driving a customer- a vending cash from an elevator food at a medical rental car service machine an ATM Riding an buffet dinner history Using a worker Assembling escalator Bagging of health club interaction premade groceries Searching for facility (self- furniture information Direct service) in a library Customer Customer Food Giving a Providing Home Portrait Haircutting Contact service service in a lecture public carpet painting Performing worker restaurant Handling transport- cleaning Counseling a surgical interaction Hand car routine bank a tion Landscaping operation washing transactions Providing service mass vaccination

Generic Approaches to Service Design 1. Production-line McDonald’s • Limit Discretion of Personnel mufflers • Division of Labor MRI tech • Substitute Technology for People greeting card reorder • Standardize the Service franchising - Starbucks 2. Customer as Coproducer Pizza Hut buffet • Self Service automatic check-in at airlines • Smoothing Service Demand midweek ski lift discount 3. Customer Contact front office/back office • Degree of Customer Contact laundry at a hospital • Separation of High and Low Contact Operations Airline reservationists/baggage handler 4. Information Empowerment IT – it’s not just for nerds anymore • Employee cancelled airline flight • Customer package tracking

Customer Value Equation

Discussion Questions What are the limits in the production-line approach to service? Give examples of a service in which substituting technology for people would be inappropriate. What are some drawbacks of customer participation in the service delivery process? What ethical issues are raised in the promotion of sales during a service transaction?