Chapter 4Chapter 4New Service New Service DevelopmentDevelopment

Learning ObjectivesLearning Objectives

1.1. New service development New service development process.process.

2.2. Service blueprinting.Service blueprinting.

3.3. Dimensions of divergence and Dimensions of divergence and complexity.complexity.

4.4. Taxonomy of service processes.Taxonomy of service processes.

5.5. Generic approaches to service Generic approaches to service system design.system design.

Levels of Service Levels of Service InnovationInnovation

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

ServedServed

II. Incremental InnovationsII. Incremental Innovations Service Line ExtensionsService Line Extensions Service ImprovementsService Improvements Style ChangesStyle Changes

Technology Driven Service Technology Driven Service InnovationInnovation

Power/energyPower/energy Physical designPhysical design Materials Materials Methods Methods InformationInformation

Service Design Service Design ElementsElements

StructuralStructural- Delivery system- Delivery system- Facility design- Facility design- Location- Location- Capacity planning- Capacity planning

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

New Service New Service Development CycleDevelopment Cycle

People

Technology Systems

Product

Full Launch Development

Design Analysis

Org

aniz

atio

nal

Con

text Team

s

Tools

Enablers

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

• Business analysis• Project authorization

• Full-scale launch• Post-launch review

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

Service Blueprint of Service Blueprint of Luxury HotelLuxury Hotel

Strategic PositioningStrategic Positioning Through Process Structure Through Process Structure

Degree of ComplexityDegree of Complexity

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

Degree of DivergenceDegree of Divergence

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

Structural Alternatives for a Structural Alternatives for a

RestaurantRestaurant

No Reservations

Self-seating. Menu on BlackboardEliminate

Customer Fills Out Form

Pre-prepared: No Choice

Limit to Four Choices

Sundae Bar: Self-service

Coffee, Tea, Milk onlyServe Salad & Entree Together:

Bill and Beverage Together

Cash only: Pay when Leaving

TAKE RESERVATIONSEAT GUESTS, GIVE MENUSSERVE WATER AND BREAD

TAKE ORDERSPREPARE ORDERS

Salad (4 choices)

Entree (15 choices)

Dessert (6 choices)

Beverage (6 choices)SERVE ORDERS

COLLECT PAYMENT

Specific Table SelectionRecite Menu: Describe Entrees & SpecialsAssortment of Hot Breads and Hors D’oeuvresAt table. Taken Personally by Maltre d’

Individually Prepared at table

Expand to 20 Choices: Add Flaming Dishes;Bone Fish at Table; Prepare Sauces at TableExpand to 12 Choices

Add Exotic Coffees; Sherbet betweenCourses; Hand Grind Pepper

Choice of Payment. Including House Accounts:Serve Mints

LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS HIGHER COMPLEXITY/DIVERGENCE

Taxonomy of Service Taxonomy of Service ProcessesProcesses

Low divergence High divergenceLow divergence High divergence (standardized service) (customized service)(standardized service) (customized service) Processing Processing Processing Processing Processing ProcessingProcessing Processing Processing Processing Processing Processing of goods Information of people of goods Information of peopleof goods Information of people of goods Information of people Dry Check Auto repair ComputerDry Check Auto repair Computer No Cleaning processing Tailoring a programmingNo Cleaning processing Tailoring a programming Customer Restocking Billing for a suit Designing a Customer Restocking Billing for a suit Designing a Contact a vending credit card buildingContact a vending credit card building machine machine Ordering SupervisionOrdering Supervision Indirect groceries of a landingIndirect groceries of a landing customer from a home by an aircustomer from a home by an air contact computer controllercontact computer controller No Operating Withdrawing Operating Sampling Documenting Driving aNo Operating Withdrawing Operating Sampling Documenting Driving a customer- a vending cash from an elevator food at a medical rental carcustomer- a vending cash from an elevator food at a medical rental car service machine an ATM Riding an buffet dinner history Using a service machine an ATM Riding an buffet dinner history Using a worker Assembling escalator Bagging of worker Assembling escalator Bagging of health club health club interaction premade interaction premade groceries Searching for facility groceries Searching for facility (self- furniture information(self- furniture informationDirect service) in a libraryDirect service) in a libraryCustomer Customer Food Giving a Providing Home Portrait HaircuttingCustomer Customer Food Giving a Providing Home Portrait HaircuttingContact service service in a lecture public carpet painting PerformingContact service service in a lecture public carpet painting Performing worker restaurant Handling transport- cleaning Counseling a surgicalworker restaurant Handling transport- cleaning Counseling a surgical interaction Hand car routine bank a tion Landscaping operation interaction Hand car routine bank a tion Landscaping operation washing transactions Providing servicewashing transactions Providing service mass mass vaccinationvaccination

Generic Approaches to Generic Approaches to Service DesignService Design

1. Production-line 1. Production-line McDonald’sMcDonald’s• • Limit Discretion of PersonnelLimit Discretion of Personnel mufflers mufflers• • Division of LaborDivision of Labor MRI tech MRI tech• • Substitute Technology for PeopleSubstitute Technology for People greeting card reorder greeting card reorder• • Standardize the ServiceStandardize the Service franchising - Starbucks franchising - Starbucks

2. Customer as Coproducer 2. Customer as Coproducer Pizza Hut Pizza Hut buffetbuffet

• Self Service• Self Service automatic check-in at airlines automatic check-in at airlines• Smoothing Service Demand• Smoothing Service Demand midweek ski lift midweek ski lift

discountdiscount

3. Customer Contact 3. Customer Contact front office/back officefront office/back office• Degree of Customer Contact • Degree of Customer Contact laundry at a hospital laundry at a hospital• Separation of High and Low Contact Operations• Separation of High and Low Contact Operations

Airline reservationists/baggage handlerAirline reservationists/baggage handler

4. Information Empowerment4. Information Empowerment IT – it’s not just for nerds IT – it’s not just for nerds anymoreanymore

• Employee• Employee cancelled airline flight cancelled airline flight• • Customer Customer package tracking package tracking

Customer Value EquationCustomer Value Equation

erviceuiringtheSCostsofAcqicePr

tyocessQualiProducedPrsultsReValue

Discussion QuestionsDiscussion Questions

1.1. What are the limits in the production-line What are the limits in the production-line approach to service?approach to service?

2.2. Give examples of a service in which Give examples of a service in which substituting technology for people would substituting technology for people would be inappropriate.be inappropriate.

3.3. What are some drawbacks of customer What are some drawbacks of customer participation in the service delivery participation in the service delivery process?process?

4.4. What ethical issues are raised in the What ethical issues are raised in the promotion of sales during a service promotion of sales during a service transaction?transaction?