New Service Development

Competitive Environment of Services

How do each of these factors affect the
competitiveness of service firms?
• Entry Barriers
• Economies of Scale
• Sales Fluctuations
• Power Dealing with Buyers or Suppliers
• Product Substitutions for Service
• Customer Loyalty
• Exit Barriers
Examples of Competitive Priorities
• Availability(24 hour ATM)
• Convenience (Site location)
• Dependability (On-time performance)
• Customization (Personalization)
• Price (Quality surrogate)
• Quality (Perceptions important)
• Reputation(Word-of-mouth)
• Safety (Customer well-being)
• Speed (Avoid excessive waiting)
 New-service Development Strategy

– The development of original service, improvements, modifications,

and new brands through the firm’s own service development efforts.
 New-service Failures
• Why fail?
– Overestimation of market size.
– Design problems.
– Incorrectly positioned, priced, or advertised.
– Pushed by high level executives despite poor marketing research
findings.
– Excessive development costs.
– Competitive reaction.
 New-Service Development Process
• Idea generation
• Idea screening
• Concept development and testing
• Marketing strategy development
• Business analysis
• Service development
• Test marketing
• Commercialization
 New-Service Development Process
• Idea generation:
– Internal sources:
• Company employees at all levels.
– External sources:
• Customers
• Competitors
• Distributors
• Suppliers
• Outsourcing (design firms, product consultancies,
online collaborative communities)
 New-Service Development Process
• Idea screening:
– Process used to spot good ideas and drop poor ones.
– Executives provide a description of the service along with estimates
of market size, price, development time and costs, manufacturing
costs, and rate of return.
– Evaluated against a set of company criteria for new service.
 New-service Development Process
• Concept development and testing:
– idea:
• Idea for a possible service that the company can see itself offering to the
market.
– Service concept:
• Detailed version of the new-service idea stated in meaningful consumer
terms.
– Concept testing:
• Testing new-product concepts with groups of target consumers to find out if
the concepts have strong consumer appeal.
 New-service Development Process

• Marketing strategy development:

• Describes the target market, planned value proposition,
sales, market share, and profit goals.
• Outlines the product’s planned price, distribution, and
marketing budget.
• Describes the planned long-run sales and profit goals,
marketing mix strategy.
 New-service Development Process
• Business analysis:
– Involves a review of the sales, costs, and profit projections to assess
fit with company objectives.
– If results are positive, project moves to the product development
phase.
 New-service Development Process
• Testing marketing:
– Service and marketing program are introduced in a more realistic
market setting.
– Not needed for all services.
– Can be expensive and time consuming, but better than making a
major marketing mistake.
 New-Service Development Process
• Commercialization:
– Must decide on timing (i.e., when to introduce the product).
– Must decide on where to introduce the product (e.g., single location,
state, region, nationally, internationally).
– Must develop a market rollout plan.
 BLUEPRINTIN
G
A service blueprint is a flow chart of the service
process. It conveys the service concept by showing all
the elements or activities and their sequencing and
interaction. It is pictorial description of service
the system showing the service at an level.
explains
overviewhow each job or department functions It
relationship to the service as a whole. in
was developed by Shostak in 1987. Blueprinting
STAGES IN PREPARATION OF
BLUEPRINTING
1. Put the service in the form of its
molecular structure
2. Divide the process into logical steps
3. Recognise the variability in the process
4. Identify the backstage actions in the process
Customer Defined Service
Standards
Standardization
• Standardization versus customization
• Standardization
• substitution of technology for personal contact
• on-line services, voice mail, automatic teller machines, automatic car wash
• improvement in work methods
• combination of these two
Customer ---standards
• Operational standards based on pivotal customer requirements that
are visible to and measured by customers.
Examples
• Safety
• Convenience
• Cleanliness
• Availability
• Consistency
• Hospitality
• Credibility
Cont.
• Waiting Time, Transaction Time
• Accuracy of Transaction
• Friendly Personnel
• Knowledgeable Personnel
• Helpful Personnel
• Costs
• Value Received
Service Encounter Sequences
• Building blocks for customer-defined standards
• Benefits
• understand specific requirements of customers
• translate into specific behaviors and actions
• facilitate behavior change in employees
 Customer-Driven Standards and
Measurements
Service Encounter Customer Requirements Measurements

Service
Quality
 Process for Setting
Customer-Defined Standards
1. Identify Existing or Desired Service Encounter Sequence

2. Translate Customer Expectations Into Behaviors/Actions

3. Select Behaviors/Actions for Standards

4. Set Hard or Soft Standards

Measure by Measure by
Audits or Hard 5. Develop Feedback Soft Transaction-
Operating Data Mechanisms Based Surveys

6. Establish Measures and Target Levels

7. Track Measures Against Standards

8. Update Target Levels and Measures

 Developing service scapes
o Effective service scapes:
• Have to be seen holistically
• Everything depends on environment
• e.g. coffee and music work together
• Themed service scapes common these days (e.g. Malls )
o Interactive service scapes (e.g. Automatic Teller Machine )
o Service scapes developed to attract new market segments
 Elements of the service scape

Facility Exterior Facility Interior Other Tangibles

Parking Layout Uniforms
Landscape Equipment Business cards
Signage Signage Stationary
Exterior design Air temperature Invoices
Interior design Brochures
Lighting Web pages
Employee dress
 The strategic role of the service scape

o Packaging
• Creates external image
• Sets expectations
o Facilitator
• Aids performances of service providers
• Physical layout and functional design
o Socializer
• Suggests expected roles, behaviors and
relationships
o Differentiator
• Distinguished from competitors
• Signals appropriate market segments
 The effects of service scapes
on consumer behaviour
 

o Customers loyalty incentives:

• High perceived value
• ‘Get’ should exceed ‘Give’
• Rewards for loyalty
o Company benefits:
• Higher profits through retaining customers
⁻ More purchases overall
⁻ More frequent purchases
• Lowers operating costs
⁻ No acquisition costs
• Increases company referrals
 How the servicescape impacts
consumers and employees

Environmental
Dimensions
Ambient Conditions
 Music Behavioral responses
 Temperature Internal Response Employee
 Air quality
 Noise Moderators Both Employees and Affiliation
 Smell Customers Exploration
 Color Cognitive Responses Stay longer
Employee
Spatial layout and  Beliefs (about place,
Response Commitment
functionality people and products)
Holistic Moderators  Categorization Carry out plan
Spatial layout
Environment  Symbolic meaning Social
Avoid opposite
 Floor plan Interaction
 Size Emotional Response between and
 Shape of Furnishings Perceived among
Servicescape Customer  Mood (The Russell customers and Customer
 Counters
Response model of affect ) employees
 Equipment Attraction
 Attitude
 Arrangement Moderators
Physiological responses Exploration
Functionality
 Ability to facilitate the  Comfort Stay longer
performance of service  Shiver Continue purchasing
transactions  Pain
 Dizzy Carry out plan
Signs, Symbols & Artifacts
 Signage Return
 Personal artifacts Spread word of mouth
 Style of décor
Avoid opposite
Staff and guests
 Behavior
 Image

Figure 8.1 (Source: Adapted from Bitner, 2002)

Servicescape Positioning
Cost Efficiency

Firm

l)
ica ees
y
chn

pl o
m
(Te

Service E Customers
Quality
(Functional) Customization
Objectives and Goals
• Customization • Meet Needs of
Customers
• Functional Service • Meet needs of
customers
• Maximize employee
• Technical Service efficiency
• Reduce costs and
• Cost Efficiency increase productivity
• Thank u