1. DEVELOPING SERVICE CONCEPTS-
CORE AND SUPPLEMENTARY
ELEMENTS
1 st P= Product

2. OVERVIEW
 Creating a service concept- first part in creating a
service model
 Focus on first P- product element
 All service org- face choices concerning the type of
products to offer and how to deliver
 Useful to distinguish the core elements and
supplementary elements which enhance the use

3. WHAT IS A SERVICE PRODUCT?
 Mfged goods- camera fuel- title to physical objects
 Service performances- are experienced than
owned- even when there are physical elements
involved to the title- cooked meal, valve
replacement – significant portion of the price paid
by customers is for value added by service
elements- expert labor and special equipment
 Service element comprises all the elements of the
service performance both tangible and intangible
that create value for customers

4. CORE PRODUCT AUGMENTATION
 Services- defined with ref to a particular industry-
based on core set of benefits and solutions
delivered to the customer
 Core product is typically accompanied by variety of
other service related activities such as
supplementary services
 These ss facilitate the use of the core product and
add value and differentiation to the customers
overall experience
 Core products- commodities as the industry
matures and competition increases- hence
emphasize on supplementary services

5. SHOSTACK MOLECULAR MODEL
 Service concept: core and supplementary
combination
 Centre: core benefit- addressing the basic customer
need- linked to a series of other service
characteristics
 Helps in identification of tangible and intangible
elements in a service delivery
 Eg airline: intangible:transportation,service
frequency, pre,in and post flight service. Tangible:
aircraft and food

6. Key
Tangible Elements
Intangible Elements
AUGMENTING THE CORE PRODUCT
Marketing Positioning
(weighted toward evidence)
Shostack’s Molecular
Model: Passenger
Airline Service
Distribution
Pre- &
Postflight
Service
Service
Frequency
In-flight
Service
Food &
Drink
Vehicle
Transport
Price
Source: Shostack

7. SERVICE CONCEPT DESIGN
 Marketers recognize the need to take a holistic
view of the overall performance that they want the
customers to experience, highlighting the specific
dimensions on which the firm plans to compete
 Value proposition- must address and integrate the
3 comp: core product + supplementary service and
delivery process

8. Core product
• Central component
that supplies the
principal problem
solving need that the
customers need
• Eg transport,repair
services etc
Supplementary
services
• Augment the core
product ,both
facilitating its use
and enhancing its
value and appeal
• These help- extent
and value in
differentiating and
positioning core
product against
competing services
• Adding more ss-
enhances the
perceived value of
the core product for
prospects and
enables the service
providers to charge
a higher price
Delivery process
• Concerns the
process used to
deliver core product
and ss
• Service design
usually addresses:
how differently
service components
are delivered to the
customer,nature of
customers role in
process,length of
delivery,and Rxed
level and style of
service offered

9. CORE AND SUPPLEMENTARY PRODUCT DESIGN:
AN INTEGRATED PERSPECTIVE
Scheduling
Nature of
Process
Service Level Customer
Role
Supplementary
services offered
and delivered
Delivery Concept
for Core Product

10. SERVICE OFFERING FOR OVERNIGHT HOTEL
STAY
Cor
e
Reservatio
n
Parking
Checkin/o
ut
Porter
Meal
Cable tv
Phone
Room
Service
Core
Delivery
process
Supplement
ary services

11. 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
Service
Business
Centre
Cashier
A Bed for the
Night in an
Elegant Private
Room with a
Bathroom

12. WHAT HAPPENS, WHEN, IN WHAT SEQUENCE?
TIME DIMENSION IN AUGMENTED PRODUCT
Before Visit
Reservation
internet
Parking Get car
Check in
Porter
Use
room
Meal
Pay TV
Room service
Internet
Check out
Time Frame of An Overnight Hotel Stay
(Real-time service use)
USE GUESTROOM OVERNIGHT
Internet

13. DOCUMENTING THE DELIVERY SEQUENCE
OVER TIME
 Design the service concept – will address the
sequence in which customers will use each of the
core and supplementary services and to determine
the approx length of time in each instance
 Req good understanding of customer needs
,habits, expectations- for mktg, planning, operations
and personnel allocation
 Certain industries: neither core nor supplementary
services are delivered continuously

14. FLOWCHARTING
 FC: a technique for displaying the nature and
sequence of steps involved in delivering service to
customers- to understand the totality of the
customers service experience
 Useful for distinguishing steps at which customer
uses the core service and those involving service
elements that supplement the core product
 nature of customers involvement with service org
varies amongst each category of service- people
processing, mental stimulus, possession and
information

15. PEOPLE PROCESSING
Arrive at
hotel
Check in
Spend
night in
room
Breakfast Checkout
1 2 3 4 5
3: core product
1,2,4,5: visible action
3: benefits recvd

16. POSSESSION PROCESSING
Travel to store
Tech examines
player, diagnoses
the problem
Leave store
Return,pick and
play
Play at home
1 2 3 4 5
5: core product
1,2,3,4, : visible action
Tech repair: invisible action

17. INFORMATION PROCESSING
Learn abt
options
Select
plan,complete
forms
Pay
Insurance
cover begins
Printed policy
arrives
1 2 3 4 5
4: core product
1,2,3,5, : visible action
Terms of coverage,cust info in database: invisible action

18. THE FLOWER OF SERVICE

19. THE FLOWER OF SERVICE
Core
Information
Consultation
Order Taking
Hospitality
Payment
Billing
Exceptions
Safekeeping
Facilitating elements
Enhancing elements
KEY:

20. THE FLOWER OF SERVICE
 Supplementary services- play one of the two roles
 Facilitating ss: are required for service delivery or
aid in the use of core product
 Enhancing supplementary services add extra value
for customers

21. HOW TO DETERMINE WHAT SUPPLEMENTARY
SERVICES SHOULD BE OFFERED
 Not every core product is surrounded by all eight supplementary
elements
 Nature of product helps to determine:
 Which supplementary services must be offered
 Which might usefully be added to enhance value and ease of use
 People-processing and high-contact services have more supplementary
services
 Market positioning strategy determines which supplementary services
should be included
 Firms with different levels of service often add extra supplementary
services for each upgrade in service level

22. THE FLOWER OF SERVICE:
FACILITATING SERVICES—INFORMATION
Core
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

23. 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

24. 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

25. 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

26. Core
THE FLOWER OF SERVICE:
ENHANCING SERVICES—CONSULTATION
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

27. 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

28. Core
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

29. Core
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

30. MANAGERIAL IMPLICATIONS
 To develop product policy and pricing strategy, managers
need to determine:
 Which supplementary services should be offered as a standard
package or as fee based options
 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

31. Planning and Branding Service
Products

32. BRANDING ALTERNATIVES
 Purpose of branding is to establish a mental picture of
the service and clarify the value proposition
 Service marketers need to be their brand champions
 Branding alternatives are:
 Branded House – brand name to multiple offerings in
unrelated fields e.g. Virgin Group
 Sub Brands – master brand is primary frame of reference but
product has a distinctive name e.g. Singapore Airlines Raffles
Class
 Endorsed Brands – Product brand dominates the corporate
name
 e.g. hotels
 House of Brands – corporation with a number of products,
each promoted under its own brand name e.g. Proctor &
Gamble

33. Developing New Services

34. A HIERARCHY OF
NEW SERVICE CATEGORIES
Range from major innovations to simple style changes:
1. Major service innovations
 New core products for previously undefined markets
2. Major process innovations
 Using new processes to deliver existing products with added
benefits
3. Product-line extensions
 Additions to current product lines
4. Process-line extensions
 Alternative delivery procedures

35. A HIERARCHY OF
NEW SERVICE CATEGORIES
5. Supplementary service innovations
 Addition of new or improved facilitating or enhancing elements
6. Service improvements
 Modest changes in the performance of current products
7. Style changes
 Visible changes in service design or scripts

36. REENGINEERING SERVICE PROCESSES
 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

37. 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

38. CREATING SERVICES AS SUBSTITUTES FOR
OWNING AND/OR USING GOODS
 Drive Own Car
 Use Own Computer
 Rent a Car and Drive it
 Rent Use of Computer
 Hire a Chauffeur to Drive
 Hire a Typist to Type
 Hire a Taxi or Limousine
 Send Work Out to a
Secretarial Service
Own a Physical Good
Rent Use of a Physical
Good
Perform Work
Oneself
Hire Someone
to Do Work

39. CATERPILLAR PROMOTES ITS
SERVICE BUSINESSES (FIG 3.11)
Reprinted Courtesy of Caterpillar, Inc.

40. 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

41. 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

42. SUMMARY :
DEVELOPING SERVICE CONCEPTS
 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

43. SUMMARY :
DEVELOPING SERVICE CONCEPTS
 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