Chapter 4:

Developing
Service Products:
Core and Supplementary
Elements
 Overview of Chapter 4
Services Marketing

 Planning and Creating Services

 The Flower of Service

 Branding Service Products and Experiences

 New Service Development

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 2

 Services Marketing

Planning and Creating

Service Products

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 3

 Service Products
Services Marketing

A service product comprises of all elements of service performance,

both tangible and intangible, that create value for customers.
Service products consist of:

 Core Product  central component that supplies the principal,

problem-solving benefits customers seek

 Supplementary Services  augments 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

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 4

 Designing a Service Concept
Services Marketing

 Service concept design 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 recommended level and style of service to be offered

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 5

 Documenting Delivery Sequence
Over Time
Services Marketing

 Must address sequence in which customers will use each

core and supplementary service

 Determine approximate length of time required for each

step

 Information should reflect good understanding of

customers, especially their:
 needs
 habits
 expectations

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 6

 Integration of Core Product,
Supplementary Elements, and
Delivery Process Services Marketing

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 7

 Temporal Dimension to
Augmented Product"
Services Marketing

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)

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 8

 Services Marketing

The Flower of Service

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 9

 The Flower of Service
Services Marketing

 There are two types of supplementary services

 Facilitating: either needed for service delivery, or help in the use
of the core product
 Enhancing: add extra value for the customer

 In a well-managed service organization, the petals and

core are fresh and well-formed

 Market positioning strategy helps to determine which

supplementary services should be included

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 10

 The Flower of Service
Services Marketing

Information

Payment Consultation

Billing Core Order-Taking

Exceptions Hospitality

Safekeeping
KEY:
Enhancing elements"
Facilitating elements"

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 11

 Facilitating Services – Information
Services Marketing

• 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

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 12

 Facilitating Services – Order-Taking
Services Marketing

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
Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 13
 Facilitating Services – Billing
Services Marketing
• Periodic statements of account
activity
• Invoices for individual
transactions
• Verbal statements of amount due
• Self-billing (computed by
customer)
• Machine display of amount due

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 14

 Facilitating Services – Payment
Services Marketing
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)
• Human systems (e.g., toll collectors)
Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 15
 Enhancing Services – Consultation
Services Marketing
• Customized advice
• Personal counseling
• Tutoring/training in product use
• Management or technical
consulting

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 16

 Enhancing Services – Hospitality
Services Marketing
Greeting
Food and beverages
Toilets and washrooms
Waiting facilities and
amenities
• Lounges, waiting areas,
seating
• Weather protection
• Magazines,
entertainment,
newspapers
Transport
Security

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 17

 Enhancing Services – Safekeeping
Services Marketing
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

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 18

 Enhancing Services – Safekeeping
(cont)
Services Marketing
Caring for Goods Purchased (or
Rented) by Customers
• Packaging
• Pickup
• Transportation and delivery
• Installation
• Inspection and diagnosis
• Cleaning
• Refueling
• Preventive maintenance
• Repair and renovation

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 19

 Enhancing Services – Exceptions
Services Marketing
Special Requests in Advance of Service
Delivery
• Children’s needs
• Dietary requirements
• Medical or disability needs
• Religious observances
Handling Special Communications
• Complaints
• Compliments
• Suggestions

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 20

 Enhancing Services – Exceptions
(cont)
Services Marketing
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

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 21

 Managerial Implications
Services Marketing

 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

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 22

 Services Marketing

Branding Service
Products and Experiences

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 23

 Service Products, Product Lines,
and Brands
Services Marketing

 Service Product: A defined and consistent “bundle of output”

 Supported by supplementary services (assembly of elements that are built
around the core product)
 Differentiated by bundle of output

 Product Line: Most service organizations offer a line of products

rather than just a single product.

 There are three broad alternatives for product lines:

 Single brand to cover all products and services
 A separate, stand-alone brand for each offering
 Some combination of these two extremes

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 24

 Spectrum of Branding Alternatives "
Services Marketing

Source: Derived from Aaker and Joachimsthaler

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 25
 Example:
British Airways Subbrands
Services Marketing

British Airways offers seven distinct air travel products

Intercontinental Offerings Intra-European Offerings

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

World World Euro-

Traveller Plus
Traveller Traveller
(Premier
(Economy) (Economy)
economy)

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 26

 Offering a Branded Experience
Services Marketing

Branding can be employed at 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

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 27

 Moving Towards a Branded
Experience
Services Marketing

Shape truly
Create brand differentiated
promise customer
experience

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

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 28

 Offering A Branded Experience
Services Marketing

“The brand promise or value proposition is not a tag line, an

icon, or a color or a graphic element, although all of these
may contribute. "
"
It is, instead, the heart and soul of the brand.”"

Don Schultz"

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 29

 Services Marketing

New Service Development

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 30

 A Hierarchy of
New Service Categories
Services Marketing
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 "

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 31

 Reengineering Service Processes
Services Marketing

 Service processes affect customers and also cost, speed,

and productivity

 Reengineering – analyzing and redesigning processes to

achieve faster and better performance

 Examination of processes can lead to creation of alternative

delivery methods:
 Add or eliminate supplementary services
 Re-sequence delivery of service elements
 Offer self-service options

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 32

 Physical Goods as a Source of
New Service Ideas
Services Marketing

 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

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 33

 Creating Services as Substitutes
for Physical Good"
Services Marketing

Own a Physical Good Rent Use of Physical Good

Perform Work
Oneself
 Drive Own Car  Rent a Car and Drive it

 Use Own Computer  Rent Use of Computer

Hire Someone
to Do Work  Hire a Chauffeur to Drive  Hire a Taxi or Limousine

 Hire a Typist to Type  Send Work out to a

Secretarial Service

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 34

 Achieving Success in Developing
New Services
Services Marketing

 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

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 35

 Success Factors in
New Service Development
Services Marketing

 Market synergy
 Good fit between new product and firm’s image
 Advantage in meeting customers’ needs
 Strong support from firm during and after launch
 Understands customer purchase decision behavior

 Organizational factors
 Strong inter-functional cooperation and coordination
 Internal marketing to educate staff on new product and its
importance

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 36

 Success Factors in
New Service Development
Services Marketing

 Market research factors

 Scientific studies
conducted early in
development process
 Product concept well
defined before
undertaking field studies

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 37

 Summary
Services Marketing

 Creating services involve:

 Designing the core product, supplementary services, and their
delivery processes

 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

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 38

 Summary
Services Marketing

 Spectrum of branding alternatives exists for services

 Branded house
 Subbrands
 Endorsed brands
 House of brands

 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
 Understand how to achieve success in new service development

Slide © 2018 by Lovelock & Wirtz Services Marketing 3e Chapter 4 – Page 39