New Service Development

New Service Development
Slide 2004 by Christopher Lovelock and Jochen Wirtz
Services Marketing 5/E
4- 1
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
4- 2
New Service Development: Physical Goods as Source of Service Ideas
Customers can rent goodsuse and return for Customers can hire personnel to operate their Any new durable product may create need for
after-sales services (possession processing)Industrial Equipment
Shipping Installation Problem-solving and consulting advice Cleaning
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E
a fee instead of purchasing them

own or rented equipment
4- 3
Creating Services as Substitutes for Owning and/or Using Goods (Fig. 4-7)
Own a Physical Good
Drive own car
Rent the Use of a Physical Good
Perform the Work Oneself
Rent car and drive it

Rent word processor
Type on own word processor
and type
Hire Someone to Do the Work
Hire chauffeur to
drive car
Hire typist to use
Hire a taxi or limousine Send work to secretarial service
word processor
4- 4
Success Factors in New Service Development
Market synergy
Goodfitbetweennewproductandfirmsimage/resources Advantagevs.competitioninmeetingcustomersneeds 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
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Origin of new services
Human needs stimulus for new services Need for survival and growth in the private
sector
Social needs not adequately covered by
private sector stimulus for public sector
6
4- 6
Life cycle of a service
Infancy: many risks; high mortality rate; slow growth

of demand
Growth: acceptance by customer

Pressures for additional capacity More efficient service Adjustments in managerial style
Maturity: demand reaches saturation level (long

duration for services that meet genuine need)
Decline: changes in economy, new improved

services, changes in technology
7
4- 7
Steps in service design
Idea generation
Selection:compatibilitywithorganizationsgoalsand
resources
Private sector, drop the idea if:
Not much profit

Deteriorates company image
Incompatible with skills, facilities

Public sector
Goals less easily definable (public welfare) 8

4- 8
Levels of Service Innovation
Major Innovation: new service driven by

information and computer based technology
Start-up Business: new service for existing

market
New Services for the Market Presently

Served: new services to customers of an organization (some courses on-line)
Service Line Extensions: augmentation of

existing service line (e.g. new elective courses) 9
4- 9
Service Processes
Managing Service Encounter
4 - 10
Process- The Seventh P
4 - 11
4 - 12
4 - 13
What are Processes........?
Architecture of Services
Service Operating
That Describe
In Which
Method & Sequence Systems Work

In Order To
Create Service
That
Experiences & Outcomes
customer will value

4 - 14
Service Blueprinting
Diagrammatic representation
Helps
in identification of redundant, unnecessary or just right processes
overlapping,
Customer Focused
Service Processes Points of Customer Contact Physical Evidence
Timing each task Connect the underlying support processes

4 - 16
Components of Service Blueprints
Customer Actions
Line of Interaction Line of Visibility Onstage / Visible Contact Employees Actions Backstage / In Visible Contact Employees Actions Internal Line of Interaction Support Processes
4 - 17
Developing a Blueprint
Indentify all the key activities

Define the Big Picture Waits for announcement of Boarding Drill down Gives agent boarding pass for Varification Walks down the jetway / boards a bus
Boards Aircraft
Enter Aircraft
Let flight attendent varify boarding pass Find Seat, Stow carry on bag Sit down
4 - 18
Developing a Blueprint
Distinguish Front-Stage Stage activities

Line of Visibility
and the
Back-
Helps in integration of Marketing. Operations &

HRM
Helps in identifying potential process Fail Points

Wait Points can also be pin pointed

4 - 19
Creating a Script
Scripts are
of Behaviour that both employees and customers are expected to learn and follow during service delivery Sequence
4 - 20
Creating Scripts
Highly Structured
Reduces Variability Ensures uniform quality May lead to mindless
Lightly Structured
Flexible Varies by Situation and
Customer
delivery, ignoring customer needs
4 - 21
Identifying
Fail Points
F

Wait Points
Valet Parking Order Taking Food Service Bill Presentation Retrieval of Car
Reservation
Getting through phone Table availability Reservation record Seating
4 - 22
Setting Service Standards

Service Promises Word of Mouth Past Experiences
Personal Needs Desired Service Believes about What is Possible
Perceived Service Alterations
Zone of Tolerance
Adequate Service
Personal Needs
Predicted Service
Factors Influencing Customer Expectations of Service

4 - 23
Improving Reliability of Service Processes
Fail Safe methodes for Service

Personnel
Strategically placed microphones Colour coding Change trays Separate counters Standards for cleanliness & Uniforms Paper strips around towels
4 - 24
Improving Reliability of Service Processes
Fail Safe methodes for the Customer

Marketing communications
Flow chart for placing a service call
Posted Instructions
Recorded Announcements
Chains to configure waiting lines

Beepers at the ATM machine
4 - 25
Service Process Redesign
Objectives
Reduce the number of service failures Reduce the cycle time from customer initiation of a service process to it's completion Enhanced productivity Increased customer satisfaction
4 - 26
Service Process Redesign
Eliminating non-value-adding steps

Shifting to self service- Fed Ex
Delivering Direct Service

Bundling services
Redesign the physical aspects of service processes

4 - 27
Customer as a coproducer
Levels of customer participation Customer Presence required during service delivery
LOW
Standardised
Products
Payment may be the

only required customer input
Bus Travel, Motel Stay, Movie E.g Theatre, Uniform Cleaning Services, Slide 2004 by Christopher Lovelock and Pest Control, Possession Processing Jochen Wirtz Services Marketing 5/E
4 - 28
Levels of customer participation Customer inputs for an service
Moderate
personal physical
required
adequate outcome
Information, effort or possessions
Haircut, Full-service restaurant, E.g Agency created advertising Slide 2004 by Christopher Lovelock and campaign, Accounting services Jochen Wirtz Services Marketing 5/E
4 - 29
Levels of customer participation Customer
High
cothe
produces
service product
Customers inputs are
mandatory
E.g
Marriage counselling, Personal Training, Management consulting, rehabilitation, Weight loss

4 - 30
SST Self Service Technologies
Automated banking terminals

Automated telephone systems (phone banking)
Web Check in
Internet based services
4 - 31
SST Self Service Technologies
Psychological Factors in Customer coproduction

Advantages
Time & Cost Saving Flexibility Convenience of location Higher perceived cutomisation Fun, enjoyment
Dis Advantages
Anxiety & Strees Preferences to deal with people or avoid them
4 - 32
Addressing the challange of Problem customers
The Thief
The Rule Breaker
The Belligerent
The Family Feuders
The Vandal
The Deadbeat
4 - 33
Managing People for Service Advantage
4 - 34
Frontline Service Personnel: Source of Customer Loyalty and Competitive Advantage
Frontline is an important source of differentiation

and competitive advantage. It is:
a core part of the product the service firm the brand
Frontline also drives customer loyalty, with
employees playing key role in anticipating customer needs, customizing service delivery and building personalized relationships
4 - 35
Boundary Spanning Roles
Boundary spanners link the inside of the

organization to the outside world
Multiplicity of roles often results in service

staff having to pursue both operational and marketing goals
4 - 36
Role Stress in the Frontline

3 main causes of role stress:
Person vs. Role: Conflicts between what jobs require and employees own personality and beliefs Organization vs. Customer: Dilemma whether to follow company rules or to satisfy customer demands Customer vs. Customer: Conflicts between customers that demand service staff intervention Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 4 - 37
Emotional Labor
Theactofexpressingsociallydesiredemotionsduring
servicetransactions(Hochschild,The Managed Heart)
Three approaches used by employees

surface acting deep acting spontaneous response
Performingemotionallaborinresponsetosocietysor
managementsdisplay rules can be stressful
Good HR practice emphasizes selective recruitment,

training, counseling, strategies to alleviate stress
4 - 38
How to Manage People for Service Advantage?

Staff performance is a function of both ability and motivation. How can we get able service employees who are motivated to productively deliver service excellence?
1. Hire the right people 2. Enable your people 3. Motivate and energize your people
4 - 40
Recruitment
The right peopleareafirmsmostimportantasset:takea

focused, marketing-like approach to recruitment
Clarify what must be hired versus what can be taught Clarify nature of the working environment, corporate values
and style, in addition to job specs
Ensure candidates have/can obtain needed qualifications Evaluatecandidatesfitwithfirmscultureandvalues Fit personalities, styles, energies to the appropriate jobs
4 - 42
Select And Hire the Right People: (1) Be the Preferred Employer
Create a large pool: Compete for Talent Market Share
Whatdeterminesafirmsapplicantpool?
Positive Quality
image in the community as place to work
of its services
Thefirmsperceivedstatus
There is no perfect employee

Different
jobs are best filled by people with different skills, styles or personalities
on recruiting naturally warm personalities
Hirecandidatesthatfitfirmscorevaluesandculture Focus
4 - 43
Select and Hire the Right People: (2) How to Identify the Best Candidates
Observe Behavior
Hire Best
based on observed behavior, not words you hear predictor of future behavior is past behavior group hiring sessions where candidates given group tasks
Consider
Personality Testing
Willingness
to treat co-workers and customers with courtesy, consideration and tact regarding customer needs to communicate accurately and pleasantly
Perceptiveness Ability
4 - 44
Select and Hire the Right People: (3) How to Identify the Best Candidates
Employ Multiple, Structured Interviews

Use structured interviews built around job requirements Use more than one interviewer to reduce similar to me effects
Give Applicants a Realistic Preview of the Job

Chancetohavehands-onwiththejob Assess how the candidates respond to job realities Allow candidates to self select themselves out of the job
4 - 45
Train Service Employees
The Organizational Culture, Purpose and Strategy

Promote core values, get emotional commitment to strategy Getmanagerstoteachwhy,whatandhowofjob.
Interpersonal and Technical Skills

Both are necessary but neither is sufficient for optimal job
performance
Product/Service Knowledge
Staffsproductknowledgeisakeyaspectofservicequality Staff need to be able to explain product features and to position
products correctly
4 - 46
Factors Favoring Employee Empowerment
Firmsstrategyisbasedoncompetitivedifferentiationandon
personalized, customized service
Emphasis on long-term relationships vs. one-time transactions
Use of complex and non-routine technologies

Environment is unpredictable, contains surprises Managers are comfortable letting employees work independently
for benefit of firm and customers
Employees seek to deepen skills, like working with others, and

are good at group processes
4 - 47
Control vs. Involvement Model of Management

Control concentrates 4 key features at top of organization; Involvement pushes them down:
Information about operating results and measures of competitive performance
Rewards based on organizational performance (e.g. profit sharing, stock ownership)

Knowledge/skills enabling employees to understand and contribute to organizational performance Power to influence work procedures and organizational direction (e.g. quality circles, self-managing teams)
Source: Bowen and Lawler Services Marketing 5/E
4 - 48
Levels of Employee Involvement
Suggestion involvement
Employee recommendation
Job involvement
Jobs redesigned Employees retrained Supervisors facilitate
High involvement
Information is shared Employees skilled in teamwork, problem solving etc. Participate in decisions Profit sharing and stock ownership
4 - 49
Motivate and Energize the Frontline

Use the full range of available rewards effectively, including:
Job content Feedback and recognition Goal accomplishment
4 - 50
The Inverted Organizational Pyramid
(Fig. 11.5)
Customer Base Top Mgmt Middle Mgmt Frontline Staff Frontline Staff
Middle Mgmt & Top Mgmt Support Frontline Inverted Pyramid with a Customer & Frontline Focus
Traditional Organizational Pyramid
Legend:=Serviceencounters,orMomentsofTruth.
4 - 51
The Wheel of Successful HR in Service Firms

(Fig. 11.6) Leadership that:
Focuses the entire organization on supporting the frontline Fosters a strong service culture with passion for service and productivity Drives values that inspire, energize and guide service providers
1. Hire the Right People

Be the preferred employer & compete for talent market share
3. Motivate & Energize Your People

Utilize the full range of rewards
Service Excellence & Productivity 2. Enable Your People
Intensify the selection process
Empower Frontline Build high performance service delivery teams Extensive Training
4 - 52

New Service Development

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New Service Development

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Major process innovations--using new processes to

Product line extensions--additions to current product

Process line extensions--alternative delivery

Supplementary service innovations--adding new or

Style changes--visible changes in service design or

Services Marketing 5/E