1. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 1 Chapter 4 Creating the Service Product

2. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 2 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

3. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 3 Operating Assets (Facilities/Equipment, IT Systems, People, Op. Skills, Cost Structure) Service Design Involves Matching Marketing Concept with Operations Concept (Fig. 4.1) Corporate Objectives and Resources Service Delivery Process Marketing Assets (Customer Base, Mkt. Knowledge, Implementation Skills, Brand Reput.) Service Marketing Concept Benefits to customer from core/ supplementary elements, style, service level, accessibility User costs/outlays(spend)incurred Price/other monetary costs Time Mental and physical effort Neg. sensory experiences Service Operations Concept Nature of processes Geographic scope of ops Scheduling Facilities design/layout HR (numbers, skills) Leverage (partners, self-service) Task allocation: front/backstage staff; customers as co-producers

4. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 4 Understanding the Components of the Augmented (improved) Service Product

5. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 5 Shostack’s Molecular Model of a Total Market Entity - Passenger Airline Service (Fig. 4-2) Distribution Price Marketing Positioning (Weighted toward evidence) Source: Shostack KEY Tangible elements Intangible elements Service frequency Vehicle Transport Pre-and post-flight service Food and drink In-flight service

6. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 6 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(request) of the core

7. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 7 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 offered and how created and delivered Delivery Concept For Core Product

8. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 8 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?

9. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 9 Core and Supplementary Services in a Luxury Hotel (Offering Guests Much More than a Cheap Motel!)

10. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 10 What Happens, When, and in What Sequence? The Time Dimension in the Augmented Service Product Pre Visit Reservation USE GUESTROOM OVERNIGHT Parking Get car Check in Porter USE ROOM Meal Pay TV Room service Phone Check out Time Frame of an Overnight Hotel Stay (real-time service use)

11. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 11 The Flower of Service: Categorizing Supplementary Services (Fig. 4-5) Core Information Consultation Order-Taking Hospitality Payment Billing Exceptions Safekeeping Facilitating elements Enhancing elements KEY :

12. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 12 Facilitating Services - Information (Table 4.1) Core Customers often require information about how to obtain and use a product or service. They may also need reminders and documentation

13. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 13 Facilitating Services - Order-Taking (Table 4.2) Many goods and services must be ordered or reserved in advance. Customers need to know what is available and may want to secure commitment to delivery Core

14. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 14 Facilitating Services - Billing (Table 4.3) “How much do I owe you?” Customers deserve clear, accurate and intelligible bills and statements Core

15. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 15 Facilitating Services - Payment (Table 4.4) Customers may pay faster and more cheerfully if you make transactions simple and convenient for them Core

16. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 16 Enhancing Services - Consultation (Table 4.5) Value can be added to goods and services by offering advice and consultation tailored to each customer’s needs and situation Core

17. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 17 Enhancing Services - Hospitality (Table 4.6) Customers who invest time and effort in visiting a business and using its services deserve to be treated as welcome guests (after all, marketing invited them there!) Core

18. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 18 Enhancing Services - Safekeeping (Table 4.7) Customers prefer not to worry about looking after the personal possessions that they bring with them to a service site. They may also want delivery and after-sales services for goods that they purchase or rent Core

19. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 19 Enhancing Services - Exceptions (Table 4.8) Customers appreciate some flexibility in a business when they make special requests. They expect it when not everything goes according to plan Core

20. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 20 Branding Service Products

21. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 21 Service Branding: Clarifying Distinctive Service Offerings  Marriott Hotel Brands  Marriott Hotels  Marriott Resorts  Courtyard by Marriott  Fairfield Inns  Residence Inns  SpringHill Suites  TownePlace Suites  Marriott Vacation Clubs International  British Airways Brands Intercontinental  First  Club World  World Traveller Plus  World Traveller European  Club Europe  Euro-Traveller UK Domestic  Shuttle

22. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 22 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

23. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 23 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

24. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 24 New Service Development

25. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 25 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

26. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 26 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

27. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 27 Creating Services as Substitutes for Owning and/or Using Goods (Fig. 4-7) Perform the Work Oneself Hire Someone to Do the Work Own a Physical GoodRent the Use of a Physical Good Hire a taxi or limousine Send work to secretarial service Rent car and drive it Rent word processor and type Hire chauffeur to drive car Hire typist to use word processor Drive own car Type on own word processor

28. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 28 Service Development through Delivery Options: Alternative Meal Service Formats (Fig. 4-8) Home Delivery Order food, give address Driver rings doorbell Pay driver, take food Eat Telephone Restaurant Drive-In Restaurant (Take Out ) See sign Order via microphone Get meal at pickup, pay Drive away, eat later Stop car at order point Fast-Food Restaurant (Eat In) See sign Park and enter Order meal, and pay Pick up meal Find table and eat Clear table and leave Home Catering Arrange to meet caterer Plan meal, pay deposit Food and staff arrive Meal is prepared and served Eat Staff cleans up; pay

29. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 29 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

30. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 30 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