1. A Framework For Developing Effective Service Marketing Strategies: Overview
Understanding Customer Needs, Decision Making, and Behavior in Service Encounters
Building the Service Model
Managing the Customer Interface
Value Proposition – specified package of benefits and solution, emphasizing key points of difference relative to competing alternatives ad how to it proposes to deliver them to target customers.
Implementing Profitable Service Strategies

2. Ashesi University COURSE TITLE : SERVICES MARKETING
SEMESTER : SECOND, 2010/2011
MODULE 8: Marketing Mix I: The Service Product
Lecturer: Ebow Spio

3. Learning Outcomes Understand the key ingredients in a service product
Document the delivery sequence over time
Know the role of flowcharting in clarifying product elements
Categorize supplementary services that surround the core product
Understand the role of branding for different service products
Know the hierarchy of new service categories
Know how new services can be developed
Know the ingredients of success in developing new services

4. Planning and Creating Services
A service product comprises all elements of service performance, both tangible and intangible, that create value for customers
The service concept is represented by:
A core product i.e. addresses the basic need such as providing transport service
Accompanied by supplementary services : Facilitate use of core product and add value and differentiation to the customer’s overall experience

5. Core Products and Supplementary Services
In mature industries, core products often become commodities
Supplementary services help to differentiate core products and create competitive advantage by:
Facilitating use of core product (a service or a good)
Enhancing the value and appeal of the core product

6. Augmenting the Core Product (Fig 3.1)
Figure 3.1
Shostack’s Molecular Model: Passenger Airline Service
Distribution
Price
Pre- & Postflight Service
Service Frequency
In-flight Service
Food & Drink
Vehicle
Transport
There are tangible elements and intangible elements of the service. Supplementary services either facilitate the core service or enhance the service.
Key
Tangible Elements
Intangible Elements
Marketing Positioning
(weighted toward evidence)
Source: Shostack

7. Augmenting the Core Product
Are supplementary services needed to facilitate use of core product or simply to add extra appeal?
Should customers be charged separately for each service element?
Or should all elements be bundled at a single price?

8. Designing a Service Concept
Core Product
Central component that supplies the principal, problem-solving benefits customers seek
Supplementary Services
Augment the core product, facilitating its use and enhancing its value and appeal
Delivery Processes
Used to deliver both the core product and each of the supplementary services
Value Proposition is a specified package of benefits and solutions that highlights key points of difference relative to competing alternatives. Value proposition must address and integrate core product, supplementary services, and delivery processes.

9. Defining Core and Supplementary Elements of Our Service Product
How is our core product defined and what supplementary elements augment it?
What product benefits create most value for customers?
Is our service package differentiated from competition in meaningful ways for target customers?
What are current levels of service on core product and each supplementary element?
Can we charge more for higher service levels? For example:
Faster response and execution
Better physical amenities
Easier access
Higher staffing levels
Superior caliber personnel
Alternatively, should we cut service levels and charge less?

10. Core and Supplementary Product Design: An Integrated Perspective (Fig 3.2)
Delivery Concept
for Core Product
Supplementary
services offered
and delivered
Scheduling
Nature of Process
Service Level
Customer
Role
The design of the service offering must address the following issues
How the different service components are delivered to the customer
The nature of the customer’s role in those processes
How long delivery lasts
The prescribed level and style of service to be offered.

11. Documenting Delivery Sequence Over Time
Must address sequence in which customers will use each core and supplementary service
Determine approximate length of time required for each step
Customers may budget a specific amount of time for an activity
Information should reflect good understanding of customers, especially their:
Needs
Habits
Expectations
Question: Do customers’ expectations change during service delivery in light of perceived quality of each sequential encounter?

12. Core and Supplementary Services at Luxury Hotel (Offering Much More than Cheap Motel!)
Reservation
Valet
Parking
Reception
Baggage
Service
Cocktail
Bar
Restaurant
Entertainment/ Sports/ Exercise
Internet
Wake-up
Call
Room
Business
Center
Cashier
A Bed for the Night in an Elegant Private Room with a Bathroom

13. What Happens, When, in What Sequence
What Happens, When, in What Sequence? Time Dimension in Augmented Product (Fig 3.3)
Reservation
internet
Parking
Get car
Check in
Check out
Internet
Internet
Use room
USE GUESTROOM OVERNIGHT
Porter
Pay TV
Meal
Room service
Time Frame of An Overnight Hotel Stay
(Real-time service use)
Before Visit

14. Flowcharting Service Delivery Helps to Clarify Product Elements
Offers way to understand totality of customer’s service experience
Useful for distinguishing between core product itself and service elements that supplement core
Restaurants: Food and beverage (core)
Reservations (supplementary services)
Shows how nature of customer involvement with service organizations varies by type of service:
People processing
Possession processing
Mental Stimulus processing
Information processing
Flowcharting, a technique for displaying the nature and sequence of the different steps involved in delivering service to customers.

15. Simple Flowchart for Delivery of a People-Processing Service (Fig 3.4)
People Processing – Stay at Motel
Park Car
Check In
Spend Night in Room
Breakfast
Check Out
Breakfast Prepared
Maid Makes up Room

16. Simple Flowchart for Delivery of a Possession-Processing Service
Possession Processing – Repair a DVD Player
Travel to Store
Technician Examines Player, Diagnoses Problem
(Later) Play DVDs at Home
Leave Store
Return, Pick up Player and Pay
Technician Repairs Player

17. Simple Flowchart for Delivery of Mental Stimulus-Processing Service
Mental Stimulus Processing – Weather Forecast
Turn on TV, Select Channel
View Presentation of Weather Forecast
TV Weatherperson Prepares Local Forecast
Confirm Plans for Picnic
Meteorologists Input Data to Models and Creates Forecast from Output
Collect Weather Data

18. Simple Flowchart for Delivery of An Information-Processing Service
Information Processing – Health Insurance
Learn about Options
Select Plan, Complete Forms
Pay
Customer Information Entered in Database
Printed Policy Documents Arrive
Insurance Coverage Begins
University and Insurance Company Agree on Terms of Coverage

19. The Flower of Service (Fig 3.6)
Information
Payment
Consultation
Billing
Core
Order Taking
Facilitating Supplementary services are either required for service delivery or aid in the use of the core product. Enhancing Supplementary services add extra value for customers.
Exceptions
Hospitality
Safekeeping
KEY:
Facilitating elements
Enhancing elements

20. How to Determine What Supplementary Services Should Be Offered
Not every core product is surrounded by supplementary elements from all eight clusters
Nature of product helps to determine:
Which supplementary services must be offered
Which might usefully be added to enhance value and ease of doing business with the organization
People-processing and high-contact services tend to have more supplementary services
Market positioning strategy helps to determine which supplementary services should be included
Firms that offer different levels of service often add extra supplementary services for each upgrade in service level ( E.g. first class, business class or economy class)

21. The Flower of Service: Facilitating Services—Information
Customers often require information about how to obtain and use a product or service.
Examples of elements:
Directions to service site
Schedule/service hours
Prices
Conditions of sale
Usage instructions
Core

22. The Flower of Service: Facilitating Services—Order Taking
Core
Customers need to know what is available and may want to secure commitment to delivery. The process should be fast and smooth.
Examples of elements:
Applications
Order entry
Reservations and check-in

23. The Flower of Service: Facilitating Services—Billing
Core
“How much do I owe you?”
Bills should be clear,
Accurate, and intelligible.
Examples of elements:
Periodic statements of
account activity
Machine display of amount
due

24. The Flower of Service: Facilitating Services—Payment
Core
Customers may pay faster
and more cheerfully if you
make transactions simple
and convenient for them.
Examples of elements:
Self service payment
Direct to payee or intermediary
Automatic deduction

25. The Flower of Service: Enhancing Services—Consultation
Core
Value can be added to goods and services by offering advice and consultation tailored to
each customer’s needs and situation.
Examples of elements:
Customized advice
Personal counseling
Management consulting

26. The Flower of Service: Enhancing Services—Hospitality
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!
Examples of elements:
Greeting
Waiting facilities and amenities
Food and beverages
Toilets and washrooms
Security
Core

27. The Flower of Service: Enhancing Services—Safekeeping
Customers prefer not to worry about looking after the personal possessions that they bring with them to a service site.
Examples of elements:
Looking after possessions
customers bring with them
Caring for goods purchased
(or rented) by customers
Core

28. The Flower of Service: Enhancing Services—Exceptions
Customers appreciate some
flexibility when they make special requests and expect responsiveness when things don’t go according to plan.
Examples of elements:
Special requests in advance
Complaints or compliments
Problem solving
Restitution e.g. refund
Core

29. Managerial Implications
To develop product policy and pricing strategy, managers need to determine:
Which supplementary services should be offered as a standard package accompanying the core
Which supplementary elements could be offered as options for an extra charge
In general, firms that compete on a low-cost, no-frills basis needs fewer supplementary elements than those marketing expensive, high-value-added services
Each flower petal must receive consistent care and concern to remain fresh and appealing

30. Planning and Branding Service Products
A product implies a defined and consistent “bundle of output” and also ability of firm to differentiate its bundle of output from competitors’
Service firms can differentiate their products in similar fashion to various “models” offered by manufacturers
Providers of more intangible services also offer a “menu” of products
Represent an assembly of elements that are built around the core product
May include certain value-added supplementary services

31. Examples: Coca Cola, Nokia, Mercedes Benz, Toyota etc.
What is a BRAND?
A brand
is a product or service that has a unique identity. It may have a unique name, logo, design and packaging. It is more than an undifferentiated commodity , product or service
Examples: Coca Cola, Nokia, Mercedes Benz, Toyota etc.

32. BRAND
A name, term, symbol or design, or a combination of them intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.

33. Brands vs. Products
“ A brand is a product or service or organization, considered in combination with its name, its identity and its reputation” Simon Anholt

34. Branding
Branding is the process by which companies distinguish their product offerings from the competitor.
It is the process of designing, planning and communicating the name and the identity, in order to build or manage the reputation of a brand

35. Slogans e.g. “Discover the gem in reading” from Beacon Books Company
Brand Elements
Brand names
Slogans e.g. “Discover the gem in reading” from Beacon Books Company
Characters
Logos
Symbols

36. Product Lines and Brands
Most service organizations offer a line of products rather than just a single product
They may choose among three broad alternatives:
Single brand to cover all products and services
A separate, stand-alone brand for each offering
Some combination of these two extremes

37. Spectrum of Branding Alternatives (Fig 3.8)
Individual Product Branding
Corporate Branding
“Branded House”
e.g., Virgin Group
“House of Brands”
e.g., P&G
Sub-brands
e.g., Raffles Class at Singapore Airlines
Endorsed Brands
e.g., Courtyard
by Marriott
Source: Derived from Aaker and Joachimsthaler

38. Example: British Airways Sub-brands
British Airways offers six distinct air travel products
Four intercontinental offerings:
First (deluxe service)
Club World (business class)
World Traveller Plus (premier economy class)
World Traveller (economy class)
Two intra-European offerings:
Club Europe
Euro-Traveller

39. Offering a Branded Experience (1)
Branding can be employed at both corporate and product levels
Corporate brand:
Easily recognized
Holds meaning to customers
Stands for a particular way of doing business
Product brand:
Helps firm communicate distinctive experiences and benefits associated with a specific service concept
Moving toward branded customer experience includes:
Create brand promise
Shape truly differentiated customer experience
Give employees skills, tools, and supporting processes to deliver promise
Measure and monitor

40. Strategic Brand Management
The Strategic Brand Management Process is defined as involving four main steps:
1. Identifying and establishing brand positioning and values
2. Planning and implementing brand marketing programs
3. Measuring and interpreting brand performance
4. Growing and sustaining brand equity

41. Steps in Segmentation, targeting and positioning
Select Customers to Serve
Decide on value proposition
Segmentation
Divide the total market into
Smaller segments
Differentiation
Differentiate the market offering to create superior customer value
Targeting
Selecting the segment or segments to enter
Positioning
Position the market offering in the minds of the target
customers
Create value for target customers

42. Definition of Key Concepts
Market Segmentation
Dividing a market into smaller groups with distinct needs, characteristics, or behaviours who might require separate products or marketing mixes
Market Targeting
The process of evaluating each segment’s attractiveness and selecting one or more segments to enter
Differentiation
Actually differentiating the market offering to create superior customer value
Positioning
Arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers

43. A Hierarchy of New Service Categories (1)
Major service innovations
New core products for previously undefined markets e.g. eBay’s launch of auction online.
Major process innovations
Using new processes to deliver existing products with added benefits e.g. online degrees or Open University in the UK
Product-line extensions
Additions to current product lines e.g. Bankassurance by Barclays and Enterprise Insurance
Process-line extensions
Alternative delivery procedures e.g. Internet banking, ATM service

44. A Hierarchy of New Service Categories (2)
Supplementary service innovations
Addition of new or improved facilitating or enhancing elements e.g. paying utility ( electricity, water, Cable TV) bills at the bank
Service improvements
Modest changes in the performance of current products (core or supplementary or both)
Style changes
Visible changes in service design or scripts

45. Reengineering Service Processes
Service processes affect not only customers, but also cost, speed, and productivity with which desired outcome is achieved
Reengineering involves analyzing and redesigning processes to achieve faster and better performance
Running tasks in parallel instead of sequence can reduce/eliminate dead time
Examination of processes can lead to creation of alternative delivery methods that constitute new service concepts
Add/eliminate supplementary services
Resequence delivery of service elements
Offer self-service options

46. Physical Goods as a Source Of New Service Ideas
Services can be built around rentals: Alternatives to owning a physical good and/or doing work oneself
Customers can rent goods—use and return for a fee—instead of purchasing them
Customers can hire personnel to operate own or rented equipment
Any new durable good may create need for after-sales services now and in future—possession processing
Shipping
Installation
Problem-solving and consulting advice
Cleaning and maintenance
Upgrades
Removal and disposal

47. Creating Services as Substitutes for Owning and/or Using Goods (Fig 3
Rent Use of a Physical Good
Own a Physical Good
Drive Own Car
Use Own Computer
Rent a Car and Drive it
Rent Use of Computer
Perform Work Oneself
Hire a Chauffeur to Drive
Hire a Typist to Type
Hire a Taxi or Limousine
Send Work Out to a
Secretarial Service
Hire Someone to Do Work

48. Caterpillar Promotes Its Service Businesses (Fig 3.11)
Reprinted Courtesy of Caterpillar, Inc.

49. Achieving Success in Developing New Services
Services are not immune to high failure rates that plague new manufactured products
“dot.com” companies
In developing new services
Core product is of secondary importance
Ability to maintain quality of the total service offering is key
Accompanying marketing support activities are vital
Market knowledge is of utmost importance
Causes for failure include not meeting a demonstrable consumer need, inability to cover costs from revenues, and poor execution.

50. Success Factors in New Service Development
Market synergy
Good fit between new product and firm’s image/resources
Advantage versus 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

51. New Product Development : Why New Products Fail ?
Overestimation of market size or opportunity
Poor design
Incorrect positioning/differentiation
Wrong timing
Priced too high
Ineffective promotion
Management influence
High development costs
Competition
Unexpected delays in development e.g. Air Bus 380 super jumbo
Lack of sound marketing information or research

52. New Product Development : Factors that influence new product success?
Unique superior product
Well defined product concept
Better at meeting market needs
Senior Management commitment & company wide effort
A smoothly functioning and proficiency in executing the new product development process
Clearly segmented market

53. New Product Development Process
New Product Strategy
Idea Generation
Idea Screening, Concept Development & Testing
Marketing Strategy
Business Analysis
Product Development
Test Marketing
Commercialization

54. Summary and Key Points Planning and creating services involve:
Augmenting core product
Designing core product, supplementary services, and delivery process
Documenting delivery sequence over time with flowcharts
Gaining insights from flowcharting
Flower of service includes core product and two types of supplementary services: facilitating and enhancing
Facilitating services include information, order taking, billing, and payment
Enhancing services include consultation, hospitality, safekeeping, and exceptions
Spectrum of branding alternatives exists for services
Branded house
Sub-brands
Endorsed brands
House of brands

55. Summary and Key Points Seven categories of new services:
Major service innovations
Major process innovations
Product-line extensions
Process-line extensions
Supplementary service innovations
Service improvements
Style changes
To develop new services, we can
Reengineer service processes
Use physical goods as a source of new service ideas
Use research to design new services
Achieve success in developing new services

56. Tutorial Assignment
Choose a service with which you are familiar and create a simple flowchart for it. Define the front stage and back stage activities.
Identify some real-world examples of branding from financial services such as specific types of retail bank accounts or insurance policies and define their characteristics. How meaningful are these brands likely to be to customers?
Explain the role of supplementary services. Can they be applied to goods as well as services? If so, how might they relate to marketing strategy?

57. Tutorial Assignment
4. Explain the “Flower of Service” concept and identify each of the petals. What insights does this concept provide for service marketers?
Be Our Guest : How Disney Does it
6. Group Assignment 1 : Case :Dr Beckett’s Dental Office on page 495 of Core Text. Answer questions 1-4.
Submission Date: 19/02/2010