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 Development Enablers • 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 Design Product Technology Systems Tools 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 Pre-prepared: No Choice CURRENT PROCESS TAKE RESERVATION SEAT GUESTS, GIVE MENUS SERVE WATER AND BREAD TAKE ORDERS PREPARE ORDERS Salad (4 choices) Limit to Four Choices Entree (15 choices) Sundae Bar: Self-service Dessert (6 choices) Coffee, Tea, Milk only Serve Salad & Entree Together: Bill and Beverage Together Cash only: Pay when Leaving Beverage (6 choices) SERVE ORDERS COLLECT PAYMENT HIGHER COMPLEXITY/DIVERGENCE Specific Table Selection Recite Menu: Describe Entrees & Specials Assortment of Hot Breads and Hors D’oeuvres At table. Taken Personally by Maltre d’ 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 Choice of Payment. Including House Accounts: Serve Mints Taxonomy of Service Processes 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 Customer Contact Indirect customer contact Direct Customer Contact No customerservice worker interaction (selfservice) Customer service worker interaction Processing of people High divergence (customized service) Processing Processing of goods Information Auto repair Computer Tailoring a programming suit Designing a building Processing of people Supervision of a landing by an air controller Operating a vending machine Assembling premade furniture Withdrawing cash from an ATM Operating an elevator Riding an escalator Food service in a restaurant Hand car washing Giving a lecture Handling routine bank transactions Providing public transporta tion Providing mass vaccination 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 Generic Approaches to Service Design 1. Production-line • Limit Discretion of Personnel • Division of Labor • Substitute Technology for People • Standardize the Service 2. Customer as Coproducer • Self Service • Smoothing Service Demand 3. Customer Contact McDonald’s 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 • Degree of Customer Contact • Separation of High and Low Contact Operations Airline reservationists/baggage handler 4. Information Empowerment • Employee • Customer IT – it’s not just for nerds anymore cancelled airline flight package tracking Customer Value Equation ( Re sults Pr oduced) + (Pr ocessQuality ) Value = (Pr ice ) + (CostsofAcquiringtheService) 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?