4 . The objective of product development is to design bundles of output that are distinct and can easily be differentiated from other products. + All service organizations face choices concerning the types of products to be offered and the ways of delivering them to customers + To better understand the nature of services, it’s useful to distinguish between the core product and the supplementary elements that facilitate its use and enhance its value for customers1 ee) ate) jectives + Learning service products * Understanding Core components of service product + Understanding service design model + Understanding new service development process Choosing appropriate decision making tools for new service design Understanding different design attributes and their strategic implementationsUnit 4: Service Design SERVICE DESIGN Assets Policy People CultureCreating Service aeyete ns 7 * In recent years, more and more service firms have started talking about their products—a term previously associated largely with manufactured goods. ¢ A product implies a defined and consistent “bundle of output” as well as the ability to differentiate one bundle of output from another. In a manufacturing context, the concept is easy to understand and visualize.as Q) Q oO ore Components of Service Prod he elements of the - Aservice product comprises all t al and intangible, service performance, both physic: that create value for customers. + Experienced service designers and marketers recognize the need to take a holistic view of the entire performance that they want customers to experience.Creating Service Products + Service firms can also differentiate their products as manufacturers do by offering various product “models.” + For example, fast-food restaurants display a menu of their products, which are of course highly tangible.Creating Service Products * Providers of more intangible services also offer various “models” of products. Usually,these represent an assembly of carefully prescribed value-added supplementary services built around a core product. — Credit card companies develop different cards, each of which comes with a distinct bundle of benefits and fees. — Insurance companies offer different types of policies, — Universities offer different degree programs composed of a mix of required and elective courses.The objective of product development is to design bundles of output that are distinct and can easily be differentiated from other products. All service organizations face choices concerning the types of products to be offered and the ways of delivering them to customers. To better understand the nature of services, it’s useful to distinguish between the core product and the supplementary elements that facilitate its use and enhance its value for customers.Core Components of Service Product * Aservice product comprises all the elements of the service performance, both physical and intangible, that create value for customers. * Experienced service designers and marketers recognize the need to take a holistic view of the entire performance that they want customers to experience.Core Components of Service Product * The value proposition must address and integrate three components: 1. Core product 2. Supplementary services 3. Delivery processesThe core product is ‘what’ the customer is fundamentally buying. When buying a one-night stay in a hotel, the core service is accommodation and security. When paying to have a package delivered, the core service is the timely delivery of the package in perfect condition at the correct address. Thus, a core product is the central component that supplies the principal benefits, solutions, or experience that the customer is seeking.Core Product * Some core products are highly intangible. ¢ For example credit card and travel insurance products and the innovative design of their features, benefits, and pricing.* Delivery of the core product is accompanied by a variety of other service-related activities that we collectively refer to as supplementary services * These augment the core product, facilitating its use and enhancing its value. * Core products tend to become commoditized as an industry matures and competition increases. To gain competitive advantage, firms emphasise on supplementary services, in differentiating the core product from competing services.* The third component in designing a service concept concerns the processes used to deliver the core product and the supplementary services. * The design of the service offering must address the following issues: — How the different service components are delivered to the customer — The nature of the customers’ role in those processes — How long delivery lasts — The prescribed level and style of service to be offeredService Delivery System * Consists of: — Equipment ~ Facilities — Personnel — Procedures * Should be designed to meet overall corporate strategic objectivesIntegration of Core ComponentsService Design Model ‘Branding Service Firms, and Experiences Branding Strategies Tierng Senaces Trough Branding sa ating dia and nan ‘ito Hows ob lavas ents of a Service ding Bead Equity Branded Service — * Company’ prsontad an Eroerieeeat eset *Eaaral ae =A ol a wa pny Sorc amples ran swatonass Cina nama m0 Sand aang env Ordae ating tung Eshancing Supplementary einehaon New Service Development (NSD) iospalay + Safokooping Hierarchy of WSO Achieving Success NSO. “Exceptions + sive changes Key succes aces 0 Delivery Procoes * Saracamprowenans Marea sya > Sopplamontaysornco *Orgamzana factors innovators [aan an suppor) + Process io tensions ‘Maka resnateh eons + Preduct ine ostensons “Invotamon of custoors ‘Major tocessstnoations ante process, ealy {Major sernce novation tia ganeratonService Design Model amponens ots Serie + Core Prodect + Supplementary Sermces Facilitating Supplementan Senos: ormason onsen akg s8:ing Payment Emhancing Sopelomeoatary Serices Consataton ‘Hosoratey * Safakoopng ‘Excoptans ‘Delivery Process Branding Service Firms, and Experiences Branding Seatesies ndeshouee *Subbrance *Engorse bands ‘Hous of bance Building Brand Eqeity * Company’ prasad bana {Exernal bens Costner expenence wih company rane swstenase ‘Brand meaning Tering Sonics Through Branding +s branding dane and Gifrenbate Dundes of levels Branded Service Experiences “+ Alignment proc: and brand tne devery process censcescape ang Eevee amples * Creat enatonal [New Service Development (NSD) Hierarchy of NSD Sy cha + Serace improvements * Suppimanary sence + Process ine extensions + Prosict ine extensions * Mejor process inpovatons + Major service mnovaion Achieving Success in NSO Key success aco are: Marka: syaray * Organizational factors {aignment ane suppor) ‘Marea esearch ts “Invotvaman’ of customers sanyinthe process, eal idea generation[Link] Development * Services form dominant economic sector * With increasing trends of globalization and new technologies business has realized that for survival continuous development of new services and product is must.Hierarc w Service Catagories ¢ There are many ways for a service provider to Innovate. * Seven categories of new services, ranging from simple style changes to major innovations. 1. Style changes represent the simplest type of innovation, typically involving no changes in either processes or performance. However, they are often highly visible, create excitement, and may serve to motivate employees. + Examples include redesigning retail branches, websites, or uniforms for service employeesHierarchy,of New Service Catagories 2. Service improvements are the most common type of innovation. They involve small changes in the performance of current products, including improvements to either the core product or to existing supplementary services. + For example, hotel can have has a series of buttons where passengers can choose their music from a choice of garage, funk, and rhythm and blues. This is a simple but unique improvement that can enhance a customer’s experience.3. Supplementary service innovations take the form of adding new facilitating or enhancing service elements to an existing core service, or of significantly improving an existing supplementary service. * Low-tech innovations for an existing service can be as simple as adding parking at a retail site or agreeing to accept payment via smartphone + Theme restaurants enhance the core food service with new experiences. The cafés are designed to keep customers entertained with aquariums, live parrots, waterfalls, fiberglass monkeys, talking trees that spout environmentally related information, and regularly timed thunderstorms, complete with lightning.ante ae Catagories 4. Process line extensions often represent distinctive new ways of delivering existing products. — The intention is either to offer a different and more convenient experience for existing customers, or to attract new customers who find the traditional approach unappealing. — Often, they involve adding a lower-contact distribution channel to an existing high-contact channel, such as having self-service complement delivery by service employees, or creating online or appbased service delivery.5. Product line extensions are additions to a company’s current product lines. The first company in a market to offer such a product may be seen as an innovator. These new services may be targeted at existing customers to serve a broader variety of needs, or designed to attract new customers with different needs (or both). — For example, a restaurant may extend the product line to offer a menu for dogs, so that both the owners and their dogs can dine in the same restaurant. — Mall offering car washing facility till customer do shoppingHierarchy of New Service Catagories 6. Major process innovations involve the use of new processes to deliver existing core products with additional benefits. ~— For example, online courses are transforming higher education using cutting-edge technology such as the internet and smart devices.7. Major service innovations are new core products for markets that have not been previously defined. They usually include new service characteristics as well as radical new processes. — Major service innovations are relatively rare. More common is the use of new technologies to deliver existing services in new ways, enhance or create new supplementary services and greatly improve performance on existing ones through process redesign. — However, technology is improving so fast that we will soon see major service innovations.Hierarchy of New Service Catagories ~ For example, Amazon diversified into providing on- demand computing power and became a leader in cloud- computing services. — Other examples are Virgin Galactic and XCOR Aerospace, which hope to create sub-orbital space tourism. ~ Space Adventures, a leading company in the space-flight industry, flew the first space tourist on the Russian Soyuz spacecraft to the International Space Station in 2001.New Service Development Cycle Execution Stage Le _ Planning Stage CE) oh Come a = nology = 4 Develop- ment[Link] Cycle + Fullecale launch + Postlaunch review ae a Fat Launch velopment >> = Femmlation come cheesey + Narration + Service design and testing and screening + Process and system + Concept design and esting development and + Marketing program testing esign and esting + Personne ening + Service testing and pilot can + Test marketing C_ Desien NSD New Service DevelopmentService System Design * Service Decision Factors — Facility Location (based upon proximity to customers) — Facility Layout (depends on the presence of the customer at the location) — Product and Process Design (Covers both the intangible and tangible aspects of the service offering)Service System Design ¢ Service Decision Factors ( Contd) — Scheduling (how the workers are assigned to the service) — Worker Skills (depend on service strategy and concept, customer contact level and industrialization level) — Quality Control, Measures and Time Standards (focus is on the needs of the customer)Service System Design * Service Decision Factors (continued) — Demand/Capacity Planning (depends on the type of service and the immediacy of matching supply to demand) — Industrialization (the substitution of technology for people) ~ Standardization of Service Offering (level of uniformity provided in the service)* Service Decision Factors (continued) — Customer Contact Level (physical presence and length of time that a customer spends with a service provider) — Front Line Personnel Discretion (denotes the flexibility of the service employee while interacting with a customer) — Sales Opportunities (coincide with high customer contact and employee discretion) — Customer Participation (substitution of consumer labor for provider labor)Innovationsin»Services ¢ Basic Research: Activity directed toward increases in knowledge without specific application. * Applied Research: Activity directed toward gaining knowledge that will meet a specific need. * Development: Systematic use of knowledge directed toward the production of a product, service, or method.Unique Challenges for Service Innovation ¢ Ability to protect intellectual and property technologies. * Incremental nature of innovation. * Degree of integration required. Ability to build prototypes or conduct tests in a controlled environment.Challenges of Adopting New KOC es amy (aay Success depends on customer acceptance. + Employees often need to be retrained. * Need for adoption by all to realize full benefit. * Incentive to innovate hampered since many ideas cannot be patented.Service Innovation * Two Types — Radical innovation — Incremental innovation * Both have different process and design approachesService Innovation * Radical Service Innovation — New to world or new to world or new to market — Innovative service firms require enablers to facilitate the process — Nature of change will dictate where resources are allocated — Radical innovations imply increased risk and resource investment — Recent examples: on line auction sites like ebayService Innovation * Incremental Service Innovation — Represent minor improvements to existing product or services practices and technology — Initiation and implementation require little new organizational knowledge — Cater market with existing technology ~ Majority of innovations fall under this catagoryI CT) et) neem Ue) New Service Category Descriptions Examples Ra I Innovations Major innovation New services for markets as yet undefined. These innovations are usually driven by information- and computer-based technologies. ‘Wells Fargo Internet banking launched in May 1995. Start-up business New services in a market that already is served by existing services. Mondex USA, a subsidiary of MasterCard International, that designs and distributes smart cards for retail transactions. New services for the market presently served New service offerings to existing customers of an organization (although the services might be available from other companies). Freestanding bank branches or kiosks in supermarkets or other retail establishments (e.g., Wells Fargo kiosks in Starbucks coffee shops}.IRQo ica ued ee New Service Category Descriptions Examples Incremental Innovations Service line extensions Augmentations of the existing service line such as adding new menu items, new routes, and new | courses. Singapore Airlines’ first-class airport check-in in an exclusive lounge Service improvements | Changes in features of services that currently are offered Delta Airlines’ use of ATM-like kiosks to issue boarding passes to passengers. Style changes ‘The most common of all “new services,” these are modest forms of visible changes that have an impact on customer perceptions, emotions, and attitudes. Style changes do not change the service fundamentally, only its appearance. Funeral homes, such as Calvary Mortuary in Los Angeles, now offer abbreviated ceremonies that celebrate life instead of mourn death, full-service flower shops, and facilities with more pastels, brighter walls, and more windows and lights.Technology-Driven Service Innovation Source of Technology | Service Example Service Industry Impact Power/energy Jet aircraft International flight is feasible Nuclear energy Reduced dependence on fossil fuel Facility design Hotel atrium Feeling of grandeur/spaciousness Enclosed sports stadium | Year-round use Materials Photochromic glass Energy conservation Synthetic engine oil Fewer oil changes Methods Just-in-time (JIT) Reduce supply-chain inventories Six Sigma institutionalize quality effort Information E-commerce Increase market to worldwide Satellite TV Alternative to cable TVService Design Elements Design Elements Topics Structural Delivery system Process structure, service blueprint, strategic positioning Facility design Servicescapes, architecture, process flows, layout Location Geographic demand, site selection, location strategy Capacity planning Strategic role, queuing models, planning criteria Managerial Information Technology, scalability, use of Internet Quality Measurement, design quality, recovery, tools, six-sigma Service encounter Encounter triad, culture, supply relationships, outsourcing Managing capacity and demand Strategies, yield management, queue managementStrategic Positioning through ProcessyStructure Degree of Complexity: The number and intricacy of steps, e.g., fast-food take-out is less complex than preparation of gourmet dinner at fine restaurant Degree of Divergence: Amount of discretion or freedom that the server has to customize the service, e.g., the activities of an attorney contrasted with those of a paralegalService System Design and Tee CNT + Supporting facilities must be in place prior to offering a service + Facilitating goods such as a product or other tangible features are part of the service * Sensual and psychological benefits are associated with the service offeringService System Design and Innovation * Services might be bundled into one supporting facility * Must differentiate between core and ancillary servicesService System Design and Innovation Low Face to Face Delivery A A Telephone or Courier Current Service Incremental Service Delivery Innovation Technology Based | Technology-Driven Service Radical Service Self-Service Innovation Innovation High L Low : High Standardization of Service Offering Industrialization LevelService System Design Tools: Nigag toe elitatit * Design tool based on the process flow diagram ~ Delineate front office from back office operations — Determine standard or maximum execution times, materials and the exact process for each step — Identify potential failure points and generate mitigation plans to prevent or recover from a failureService System Design Tools: Service!Blueprinting Service Blueprint for Espresso and Coffee Shop Seen by customer Line of Visibility Not seen by customerService System Design Tools: Customer Utility Models Success depends upon customer's perceived utility or benefit provided by the service's price or non- price attributes * Promise of customer utility measurement is the ability to optimize the design of a service * Satisfaction with the quality of service affects customer loyalty and repurchase intent ‘ Cojoint Analysis (CJA):Common tool used to assess perceived utility of new service design and predict market sensitivityService System Design Tools: Customer Utility Models * Service quality can be measured along five principle dimensions: ~ Reliability — Responsiveness — Assurance — Empathy — TangiblesService System Design Tools: CuStomer Utility Models * Conjoint analysis (CJA) and discrete choice analysis (DCA) are used to model customer behavior — Discrete choice experiments involve careful design of service profile choice sets — Design of a new airport restaurant requires the following + Identification of important attributes + Specification of attribute levels + Experimental design * Presentation of alternatives of respondents + Estimation of choice modelService System Design Tools: Customer Utility Models + Conjoint analysis is a statistical market research technique that allows organizations to understand what their customers value most about the product or service. * Once they can tap this info, it is only a matter of tailoring their product to suit the needs of the majority of consumers. This is carried out by posing options into customers and asking them to pick one, just like a trade-off. * These options are various combinations of the product’s features and other attributes like the price, for instance — Stages of CJA ~ Create — Distribute - Analyze Act