Chapter 4
Creating the Service
Product
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4- 1
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
Slide ©20C04obsytChritsrtouphcer Lorveelock and Jochen Wirtz Services
Marketing 5/E 4- 2
Service Design Involves Matching Marketing
Concept with Operations Concept (Fig. 4.1)
Corporate Objectives and Resources
Marketing Assets (Customer
Operating Base,
Assets Mkt. Knowledge, Implementation
(Facilities/Equipment, Skills, Op. Skills, Cost
IT Systems, People,
Brand Reput.) Structure)
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4- 3
Service Operations Concept
Service Marketing Concept
• Nature of processes
Benefits to customer from core/ supplementary elements, style, service level, accessibility
• Geographic scope of ops
User costs/outlays incurred
• Scheduling
Price/other monetary costs • Facilities design/layout
Time • HR (numbers, skills)
Mental and physical effort • Leverage (partners, self-service)
Neg. sensory experiences • Task allocation: front/backstage
staff; customers as co-producers
Service Delivery Process
Understanding the Components of th
Product
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4- 4
Shostack’s Molecular Model of a Total Market
Entity - Passenger Airline Service (Fig. 4-2)
Distribution
Price
Service Vehicle
frequency
Transport In-flight
service
Pre- and
post-flight Food
service and
drink
KEY
Tangible elements
Intangible
elements
Marketing Positioning
(Weighted toward evidence) Source: Shostack
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4- 5
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 of the core
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4- 6
Core and Supplementary Product Design:
What Do We Offer and How Do We Create and Deliver It?
Delivery Concept
Supplementary For Core Product
services offered Scheduling Process
and how
created and
delivered Core
Service Customer
Level Role
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4- 7
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?
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4- 8
Core and Supplementary Services in a Luxury
Hotel (Offering Guests Much More than a Cheap
Motel!)
Reservatio
Cashie n Valet
r Parking
Business Reception
Center
A Bed for the
Room Night in an Baggage
Service Elegant Private Service
Room with a
Bathroom
Wake-up Cocktail
Call Bar
Telephone Restaurant
Entertainment/
Sports /
Exercise
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4- 9
What Happens, When, and in What Sequence?
The Time Dimension in the Augmented Service Product
Reservation
Parking Get car
Check in Check out
USE ROOM Phone
USE GUESTROOM OVERNIGHT
Porter
Pay TV Room service
Meal
Pre Time Frame of an Overnight Hotel Stay
Visit (real-time service
use)
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 10
The Flower of Service:
Categorizing Supplementary Services (Fig. 4-5)
Information
Payment Consultation
Billing Core Order-Taking
Exceptions Hospitality
KEY:
Facilitating Safekeeping
elements Enhancing
elements
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 11
Facilitating Services - Information
(Table 4.1)
Customers often require
information about how to
obtain and use a product
Core or service. They may also
need reminders and
documentation
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 12
Facilitating Services - Order-Taking
(Table 4.2)
Many goods and services
must be ordered or reserved
in advance. Customers need
Core
to know what is available
and may want to secure
commitment to delivery
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 13
Facilitating Services - Billing
(Table 4.3)
“How much do I owe
you?” Customers deserve
Core
clear, accurate and
intelligible bills and
statements
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 14
Facilitating Services - Payment
(Table 4.4)
Customers may pay faster
and more cheerfully if you
Core
make transactions simple
and convenient for them
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 15
Enhancing Services - Consultation
(Table 4.5)
Value can be added
to goods and services
by offering advice and
Core
consultation tailored
to each customer’s
needs and situation
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 16
Enhancing Services - Hospitality
(Table 4.6)
Customers who invest
time and effort in visiting a
business and using its
Core services deserve to be
treated as welcome
guests (after all, marketing
invited them there!)
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 17
Enhancing Services - Safekeeping
(Table 4.7)
Customers prefer not to
worry about looking after
the personal possessions
that they bring with them
Core
to a service site.
They may also want
delivery and after-sales
services for goods that they
purchase
or rent
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 18
Enhancing Services - Exceptions
(Table 4.8)
Customers appreciate
some flexibility in a
business when they make
Core special requests. They
expect it when not
everything goes according
to plan
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 19
Branding
Service Products
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 20
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
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 21
New Service
Development
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 22
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
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 23
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
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 24
Creating Services as Substitutes
for Owning and/or Using Goods (Fig.
4-7)
Own a Physical Good Rent the Use
of a Physical Good
• Drive own car • Rent car and drive it
Perform the
• Type on own word processor • Rent word processor and type
Work Oneself
Hire Someone • Hire chauffeur to drive car •• Hire a taxi or limousine
to Do the
• Hire typist to use word processor •• Send work to secretarial service
Work
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 25
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
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 26
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
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 27
