SERVICE

MARKETING
CHAPTER 4: DEVELOPING SERVICE PRODUCTS: CORE AND
SUPPLEMENTARY ELEMENTS
OVERVIEW

4.1 Planning and Creating Services

4.2 The Flower of Service
4.3 Branding Service Products and Experiences
4.4 New Service Development

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 (1)

A service product comprises of all elements of service performance, both tangible and
intangible, that create value for customers.
2
Source:
(1) http://www.holidaymood.com/images/airlines/emirates-airline.png
AUGMENTING THE CORE PRODUCT:
PASSENGER AIRLINE SERVICE
Distribution
Price

Service Vehicle
Frequency

In-flight
Transport Service
Pre- &
Postflight
Service Food &
Drink

Key
Tangible Elements
Marketing Positioning Intangible 3
(weighted toward evidence)
Elements Source: Shostack
 SERVICE PRODUCTS

Core product Supplementary

Delivery processes
services

Central component Augments the core Used to deliver both

that supplies the product, facilitating
its use and the core product and
principal, problem- each of the
solving benefits enhancing its value
and appeal supplementary
customers seek services
(1) (2) (3)

4
Source:
(1) http://citifmonline.com/wp-content/uploads/2014/08/emirates-number-contact.jpg
(2) https://cdn.ek.aero/english/images/FC_Private_Suite_02_400x300_tcm233-684772.jpg
(3) http://emirates.com
 SERVICE PRODUCTS: EMIRATES

(2)
(1)

vs.

Emirates First Class Emirates Economy Class

5
Source:
(1) http://www.traveller.com.au/content/dam/images/e/c/q/4/image.gallery.articleLeadwide.620x349.1muf2k.png/1479088720482.jpg
(2) https://seeklogo.com/images/U/uber-logo-2BB8EC4342-seeklogo.com.png
COMPARISON

Emirates First Class

Jakarta – New York
27 Oct 2017

6
COMPARISON

Emirates Economy Class

Jakarta – New York
27 Oct 2017

7
COMPARISON

vs.

Emirates First Class Emirates Economy Class

Jakarta – New York Jakarta – New York
SAME PLANE, SAME PILOT, SAME ETA
WHAT IS THE DIFFERENCE?
THE SERVICE! 8
DESIGNING A SERVICE CONCEPT

Service concept design must address the following issues:

1. How the different service components are delivered to the customer

2. The nature of the customer’s role in those processes

3. How long delivery lasts

4. The recommended level and style of service to be offered

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DOCUMENTING DELIVERY SEQUENCE
OVER TIME

Must address sequence in

which customers will use each Information should reflect good
core and supplementary service understanding of customers,
especially their:
Determine approximate length • needs
of time required for each step • habits
• expectations

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CORE AND SUPPLEMENTARY PRODUCT
DESIGN: AN INTEGRATED PERSPECTIVE
This illustrates the components of
the service offering for an
overnight stay at a luxury hotel.

The core product—overnight rental of a

bedroom—dimensioned by service level,
scheduling (how long the room may be
used before another payment becomes due),
the nature of the process (in this
instance, people processing), and the role of
the customers in terms of what they are
expected to do for themselves and what the
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hotel will do for them.
TIME DIMENSION IN AUGMENTED PRODUCT
Reservation

Parking Get car

Check in Check out
Internet Internet
Use
Room USE GUESTROOM OVERNIGHT
internet

Porter
Pay TV
Meal
Room service

Time Frame of an Overnight Hotel Stay

Before Visit (real-time service use)

A temporal dimension to the different elements of the luxury hotel

service concept, identifying when and for how long the services
are likely to be consumed by a typical guest from a given segment. 12
THE FLOWER OF SERVICE

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THE FLOWER OF SERVICE

In a well-managed service organization, the petals and core are

fresh and well-formed

Two types of supplementary services

Facilitating Enhancing

Either needed for service

delivery, or help in the use of Add extra value for the
the core product customer

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THE FLOWER OF SERVICE

Information

Payment Consultation

Billing Core Order-Taking

Exceptions Hospitality

Safekeeping
KEY:
Enhancing elements
Facilitating elements

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FACILITATING SERVICES – INFORMATION

• Directions to service site

• Schedules/service hours
• Prices
• Reminders
• Warnings
• Conditions of sale/service
• Notification of changes
• Documentation
• Confirmation of reservations
• Summaries of account activities
• Receipts and tickets

16
FACILITATING SERVICES – ORDER-TAKING

Applications
• Memberships in clubs/programs
• Subscription services (e.g., utilities)
• Prerequisite based services (e.g.,
financial credit, college enrollment)

Order Entry
• On-site order fulfillment
• Mail/telephone/e-mail/web order

Reservations and Check-in

• Seats/tables/rooms
• Vehicles or equipment rental
• Professional appointments
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FACILITATING SERVICES – BILLING

• Periodic statements of account activity

• Invoices for individual transactions
• Verbal statements of amount due
• Self-billing (computed by customer)
• Machine display of amount due

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FACILITATING SERVICES – PAYMENT
Self-Service
• Insert card, cash or token into machine
• Electronic funds transfer
• Mail a check
• Enter credit card number online

Direct to Payee or Intermediary

• Cash handling or change giving
• Check handling
• Credit/charge/debit card handling
• Coupon redemption

Automatic Deduction from Financial

Deposits
• Automated systems (e.g., machine-
readable tickets that operate entry gate)
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• Human systems (e.g., toll collectors)
ENHANCING SERVICES – CONSULTATION

• Customized advice
• Personal counseling
• Tutoring/training in product use
• Management or technical consulting

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ENHANCING SERVICES – HOSPITALITY

§ Greeting
§ Food and beverages
§ Toilets and washrooms
§ Waiting facilities and amenities
• Lounges, waiting areas, seating
• Weather protection
• Magazines, entertainment, newspapers
§ Transport
§ Security

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ENHANCING SERVICES – SAFEKEEPING

Caring for Possessions Customer Bring with

Them
• Child care, pet care
• Parking for vehicles, valet parking
• Coat rooms
• Baggage handling
• Storage space
• Safe deposit boxes
• Security personnel

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ENHANCING SERVICES – SAFEKEEPING
(CONT.)

Caring for Goods Purchased (or Rented)

by Customers
• Packaging
• Pickup
• Transportation and delivery
• Installation
• Inspection and diagnosis
• Cleaning
• Refueling
• Preventive maintenance
• Repair and renovation
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ENHANCING SERVICES – EXCEPTIONS

Special Requests in Advance of Service Delivery

• Children’s needs
• Dietary requirements
• Medical or disability needs
• Religious observances

Handling Special Communications

• Complaints
• Compliments
• Suggestions

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ENHANCING SERVICES – EXCEPTIONS
(CONT.)
Problem Solving
• Warranties and guarantees
• Resolving difficulties that arise from
using the product
• Resolving difficulties caused by accidents,
service failures
• Assisting customers who have suffered
an accident or a medical emergency

Restitution
• Refunds and compensation
• Free repair of defective goods

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SERVICE PRODUCTS, PRODUCT LINES,
AND BRANDS

Product Line
Service Product
Most service organizations
A defined and consistent
offer a line of products rather
“bundle of output”
than just single product.

• Supported by supplementary Broad alternatives for product lines:

services (assembly of elements • Single brand to cover all products and
that are built around the core services
product) • A separate, stand-alone brand for
• Differentiated by bundle of each offering
output • Some combination of these two
extremes 26
EXAMPLE:
SERVICE PRODUCT

Prudential Indonesia offers different types of insurance which

is composed of a mix of required and elective courses to meet the
diverse needs of Indonesian customers.

One bundle of output can be differentiated from another bundle of

output.

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EXAMPLE:
PRODUCT LINE

28
MANAGERIAL IMPLICATIONS

Core products do not have to have supplementary elements

Nature of product helps determine supplementary services offered
to enhance value
People-processing and high contact services have more
supplementary services
Different levels of service can add extra supplementary services
for each upgrade in service level
Low-cost, no-frills basis firms needs fewer supplementary elements
29
SPECTRUM OF BRANDING ALTERNATIVES

Source: Derived from Aaker and Joachimsthaler

Branded house (i.e., using a single brand to cover all products

Most service organizations who offer a line of
and services), house of brands (i.e., using a separate stand-alone
products rather than just a single product must
brand for each offering), or subbrands and endorsed brands
choose among four broad branding alternatives
which are both some combination of these two extremes
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SERVICE TIERING
CASE: BRITISH AIRWAYS

British Airways offers seven distinct air travel products

Intercontinental Offerings Intra-European Offerings

Club World
First (Deluxe
(Business Club Europe
Service)
Class) (Business Class)
Shuttle

World Traveller World

Traveller Euro-Traveller
Plus (Premier
(Economy) (Economy)
economy)

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OFFERING A BRANDED EXPERIENCE

Branding can be employed at corporate and product levels

Corporate brand Product brand

• Easily recognized, Helps firm communicate distinctive

• Holds meaning to customers, experiences and benefits associated
• Stands for a particular way of with a specific service concept 32
doing business
MOVING TOWARDS
A BRANDED EXPERIENCE

Shape truly
Create brand
differentiated
promise
customer experience

Give employees
skills, tools, and Measure and
supporting processes monitor
to deliver promise

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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 with added benefits

Product Line Extensions: Addition to current product lines

Process-line Extensions: Alternative delivery procedures

Supplementary Service Innovations: Additions of new or improved

facilitating or enhancing elements

Service Improvements: Modest changes in the performance of

current products

Style Changes: Visible changes in service design or scripts

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REENGINEERING SERVICE PROCESSES

Reengineering – analyzing and redesigning processes to achieve

faster and better performance

Service processes affect customers and also cost, speed, and productivity

Examination of processes can lead to creation of alternative delivery methods:

Add or eliminate supplementary services

Offer self-service options

Re-sequence delivery of service elements
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EXAMPLE: ALTERNATIVE SERVICE
CONCEPTS FOR MEAL DELIVERY

36
PHYSICAL GOODS AS A SOURCE OF
NEW SERVICE IDEAS

Goods and services may become competitive substitutes if they

offer the same key benefits

Provides an alternative to owning the physical good that can attain

the desired outcome

Any new good may create need for after-sales services now and be a
source of future revenue stream
37
 CREATING SERVICES AS SUBSTITUTES
FOR PHYSICAL GOOD

Shows four possible

delivery alternatives
each for car travel and Own a Physical Good Rent Use of Physical Good
word processing, Perform Work
respectively. Three of these Oneself
§ Drive Own Car § Rent a Car and Drive it
alternatives present service
opportunities. § Use Own Computer § Rent Use of Computer

Each alternative is based on

choosing between
ownership and rental of Hire Someone
the necessary physical to Do Work § Hire a Chauffeur to Drive § Hire a Taxi or Limousine
goods and between
performing self-service § Hire a Typist to Type § Send Work out to a
and hiring another person Secretarial Service
to perform the necessary
tasks. 38
 SERVICE IDEAS FROM PHYSICAL GOOD
CASE: CATERPILLAR

(2)

(1)

Caterpillar, the well-known manufacturer of heavy-duty earthmoving and

construction equipment, has developed a portfolio of service
businesses to complement its highly cyclical manufacturing business.
39
Source:
(1) http://s7d2.scene7.com/is/image/Caterpillar/Excavator-C835883?$cc-s$
(2) http://s7d2.scene7.com/is/image/Caterpillar/Bulldozer-C811296?$cc-s$
 ACHIEVING SUCCESS IN
DEVELOPING NEW SERVICES

Services are not immune to high failure rates that plague new manufactured
products

In developing new services:

Core product is often of secondary importance, many innovations are in supplementary
services or service delivery
Ability to maintain quality of the total service offering is key
Accompanying marketing support activities are vital
Market knowledge is of utmost importance
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 SUCCESS FACTORS IN
NEW SERVICE DEVELOPMENT

Market synergy Organizational factors Market research factors

• Good fit between new • Strong inter-functional • Scientific studies

product and firm’s image cooperation and conducted early in
• Advantage in meeting coordination development
customers’ needs process
• Internal marketing to
• Strong support from firm educate staff on new • Product concept
during and after launch
product and its well defined before
• Understands customer importance undertaking field
purchase decision studies
behavior

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