Chapter 4 New Service Development

Learning Objectives
1. 2. 3.

4.

5.

New service development process. Service blueprinting. Dimensions of divergence and complexity. Taxonomy of service processes. Generic approaches to service system design.

Levels of Service Innovation

I. Radical Innovations
Major Innovation Start-up Business New Services for the Market Presently Served

II. Incremental Innovations

Service Line Extensions Service Improvements Style Changes

Technology Driven Service Innovation

Power/energy Physical design Materials Methods Information

Service Design Elements

Structural

- Delivery system - Facility design - Location - Capacity planning

Managerial

- Service encounter - Quality - Managing capacity and demand - Information

New Service Development Cycle

Full-scale launch Post-launch review

Full Launch

Enablers

Development
Formulation of new services objective / strategy Idea generation and screening Concept development and testing

People
Service design and testing Process and system design and testing Marketing program design and testing Personnel training Service testing and pilot run Test marketing

Product

Technology
Tools

Systems

Design

Analysis
Business analysis Project authorization

Service Blueprint of Luxury Hotel

Strategic Positioning Through Process Structure

Degree of Complexity Measured by the number of steps in the service blueprint. (clinic vs. hospital)

Degree of Divergence Amount of discretion permitted the server to customize the service. (attorney vs. paralegal)

Structural Alternatives for a Restaurant

LOWER COMPLEXITY/DIVERGENCE
No Reservations Self-seating. Menu on Blackboard Eliminate Customer Fills Out Form

CURRENT PROCESS
TAKE RESERVATION SEAT GUESTS, GIVE MENUS SERVE WATER AND BREAD TAKE ORDERS PREPARE ORDERS Salad (4 choices) Entree (15 choices) Dessert (6 choices) Beverage (6 choices) SERVE ORDERS

HIGHER COMPLEXITY/DIVERGENCE
Specific Table Selection Recite Menu: Describe Entrees & Specials Assortment of Hot Breads and Hors Doeuvres At table. Taken Personally by Maltre d

Pre-prepared: No Choice Limit to Four Choices Sundae Bar: Self-service Coffee, Tea, Milk only Serve Salad & Entree Together: Bill and Beverage Together Cash only: Pay when Leaving

Individually Prepared at table Expand to 20 Choices: Add Flaming Dishes; Bone Fish at Table; Prepare Sauces at Table Expand to 12 Choices Add Exotic Coffees; Sherbet between Courses; Hand Grind Pepper

COLLECT PAYMENT

Choice of Payment. Including House Accounts: Serve Mints

Taxonomy of Service Processes

No Customer Contact Low divergence (standardized service) Processing Processing of goods Information Dry Check Cleaning processing Restocking Billing for a a vending credit card machine Ordering groceries from a home computer No customerservice worker interaction (selfservice) Customer service worker interaction Operating a vending machine Assembling premade furniture Food service in a restaurant Hand car washing Withdrawing cash from an ATM Processing of people High divergence (customized service) Processing Processing of goods Information Auto repair Computer Tailoring a programming suit Designing a building Supervision of a landing by an air controller Operating an elevator Riding an escalator Sampling Documenting Driving a food at a medical rental car buffet dinner history Using a Bagging of health club groceries Searching for facility information in a library Home Portrait Haircutting carpet painting Performing cleaning Counseling a surgical Landscaping operation service Processing of people

Indirect customer contact

Direct Customer Contact

Giving a lecture Handling routine bank transactions

Providing public transporta tion Providing mass vaccination

Generic Approaches to Service Design

1. Production-line
Limit Discretion of Personnel Division of Labor Substitute Technology for People Standardize the Service McDonalds mufflers MRI tech greeting card reorder franchising - Starbucks Pizza Hut buffet automatic check-in at airlines midweek ski lift discount front office/back office laundry at a hospital

2. Customer as Coproducer

Self Service Smoothing Service Demand

3. Customer Contact

Degree of Customer Contact Separation of High and Low Contact Operations Airline reservationists/baggage handler Employee Customer

4. Information Empowerment

IT its not just for nerds anymore cancelled airline flight package tracking

Customer Value Equation

Re sults Pr oduced Pr ocessQuali ty Value Pr ice CostsofAcq uiringtheS ervice

Discussion Questions
1. 2.

3.

4.

What are the limits in the production-line approach to service? Give examples of a service in which substituting technology for people would be inappropriate. What are some drawbacks of customer participation in the service delivery process? What ethical issues are raised in the promotion of sales during a service transaction?