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Items Description of Module

Subject Management
Name

Paper Name Services Marketing

Module Service Product Strategies

Title

Module Id Module no.-13

Pre- To Understand Services-Product Mix and Service-Product Life Cycle

Requisites

Objectives OutliningIntrinsic & Extrinsic Levels of Service-Product Framework for

Effective Services Delivery

Keywords Service Product, Services-Product Mix,Levels of Service-

Product,Supplementary Services, Services Delivery, Service-Product Life
Cycle Management

QUADRANT-I

TEXT

Service Product

Service product is a package comprising a series of service elements executed in the proper
order in keeping with the needs and wants of the consumer, with the intention of maximizing
customer satisfaction.(K. Rama Mohana Rao)

Levels of Service-Product Concept

The Service firm has to differentiate its services from the competitors to create its own
[position in the minds of the customers. Differentiation gives the service its own position in
the face of competition. A variation in the offering can differentiate the total service product
offering. A very good model that helps understand how service differentiation can be
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achieved is Theodore Levitt‟s Product concept model. The different levels are called core
benefits, basic service product, augmented service product and potential service that are
explained as follows (Rajendra Nargundkar):-

(i) Core Benefit: The first ring is the core benefit provided by the firm. The core product is
the central component that supplies the principal, problem- solving benefits customer seeks.
For example, transport services solve the need to move a person or a physical object from one
location to another, management consulting should yield expert advice on what actions a
client should take, and repair services restore damaged or malfunctioning machine or good
working order (Christopher Lovelock). Without the core benefit there is no service offering.
Every service provides the core benefit.

(ii) Basic Service Product: The intangible service through which the core benefit is received
is called the basic service. The service company adds certain features to core benefits and
transforms it into Basic service. Basic service consists of all those factors which consumers
assume to be in any offering. For example, an airline has aircraft, and other infrastructure to
implement their service.
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(iii) Expected Service: Customer expects to get certain service quality or features when they
purchase services. Some of these are unwritten features. Most service firms add these
attributes to the service delivery, and transforms basic service to expected service. When one
buys an airline ticket, the passengers expect good in – flight food, pleasant service from well-
trained crew, etc. Most of the airlines try to meet these and deliver the expected service.

(iv) Augmented Service: The augmented service product consists of the measures taken to
differentiate the service from competitors, and provide them with the service quality beyond
their expectation. Customer delight is an objective of augmentation. It can be said that the
service firm is delivering an augmented service, when the service quality is beyond the
expectation of the customer. Augmentation incurs the extra cost. At the same time,
augmentation is what makes the service competitive. Augmentation differentiates the service
from another. Providing free night suits to overnight passengers in the airline or providing the
facilities like business center in the airline lounge can be considered as augmented service.

(v) Potential Service: This level includes all the augmentations and the futuristic product
developments. At this level, the service firm tries to find out the better ways of delighting
customers. A hotel in the tourist location which was initially selling only boarding and
lodging can expand it to a resort and take its residents on sight- seeing tours, arrange cultural
evenings for its customers thereby making services much more enjoyable to the customers.
Successful firms are the ones that are innovated enough in constantly creating augmented
benefits for its customers and develop potential services.(Rajendra Nargundkar)

The Flower of Service

Christopher Lovelock developed the flower of service which indicated the core service
surrounded by the cluster of facilitating and support services. Flower comprises eight petals
in all, four of which represent facilitating the supplementary services and the remaining
indicates value-enhancing supplementary services. The facilitating supplementary services
include information, order taking, billing and payment whereas consultation, hospitality,
safekeeping and exceptions are value- enhancing supplementary services. (K. Rama Mohana
Rao)
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Facilitating Supplementary Services

(i) Information: To obtain the full value from any good or service, customers need relevant
information. The types of information range from train and airline schedules to assistance in
locating specific retail outlets, to information on the services of professional firms. New
customers and prospects are especially information- hungry. Customers‟ needs may include
directions to the site where the product is sold; service hours, prices, and instructions for use.
Traditional ways of providing information include using front-line employees, brochures,
printed notices and instruction books. (Christopher Lovelock).The example of information
elements is signboards to the service site, service performance hours charges for services and
bills and receipts.(K. Rama Mohana Rao)

(ii) Order Taking: Once customers are ready to buy, a key supplementary element comes
into play- accepting applications, orders, and reservations. Order- taking includes
applications, order entry and reservations or check-ins. Banks, insurance companies, and
utilities require prospective customers to go through an application process to gather relevant
information and to screen out those who do not need basic enrollment criteria. The Order
entry can be received through a variety of resources such as through sale personnel, phone
and e-mail, or online. The process of order taking should be polite, fast, and accurate so that
customers do not waste time and endure unnecessary mental or physical effort.(Christopher
Lovelock)
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(iii) Billing: Billing is important for the company‟s as well as the customer‟s point of view.
Customers expect accuracy, completeness and legibility in bills prepared by service
providers. Companies may provide periodic statements of account to customers or allow
customers to complete bills by themselves for greater transparency in the process.(K.Rama
Mohana Rao).Customers usually expect bills to be clear and informative, and itemized in the
ways that make it clear how the total was computed. Marketing research can help here, by
asking customers what information they want and how they would like to be organized and
presented. Busy customer hates to be kept and waiting for the bill to be prepared in a hotel,
restaurant or the rental car lot. Many hotels and car rental firms have now created express
check – out options, taking customers‟ credit card details in advance and documenting
charges later by mail. However, accuracy is essential (Christopher Lovelock)

(iv) Payment: After billing, customers have to take action on payment. Activities such as
cash handling, cheque handling, credit system and coupon system are part of the payment
system. The payment system should facilitate easy and convenient payments of bills(K. Rama
Mohana Rao). Self- service payment systems, for instance, require insertion of coins,
banknotes, tokens, or cards in machines. Most payment still takes the form of cash or credit
cards. Other alternatives include vouchers, coupons or prepaid tickets. Firms benefit from
prompt payment, because it reduces the amount of accounts receivable. To ensure that people
actually pay what is due, some service businesses have instituted control service systems,
such as ticket checks before entering a movie theatre or on board a train.(Christopher
Lovelock)

Enhancing Supplementary Services

(i) Consultation: It involves a dialogue with customers, which is directed at identifying and
understanding their requirements so as to design and develop tailored situation. Consultation
often helps customers understand their own situation better and encourages them to come up
with their own solutions and action programmes. Consultation is offered generally to help
customers use the service, clarify doubts, and other management/ technical consultancy (K.
Rama Mohana Rao). More formalized efforts to provide management and technical
consulting for corporate customers include the „solution selling‟ associated with expensive
equipment and services. Some consulting services are offered free of charge in hope of
making a sale.
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(ii) Hospitality: Hospitality - related services should, ideally, reflect pleasure at meeting
new customers and greeting old ones when they return. Well - managed businesses try at least
in small ways, to ensure their employees treat customers as guests. Courtesy and
consideration for customers‟ needs apply to both face- to- face encounters and telephone
interactions. Hospitality finds its fullest expression in face- to- face encounters. The quality
of hospitality services offered by the firm plays an important role in determining the customer
satisfaction. This is especially true for people- processing services, because one cannot leave
the service facility until the delivery of the core service completed. Private hospitals often
seek to enhance their appeal by providing the level of room service that might be expected in
a good hotel. This includes the provision of quality meals. (Christopher Lovelock)

(iii) Safekeeping: it is likely that service customers may carry personal possessions to the
service outlet and participate in service production process. Service organizations have to
make arrangements for the safekeeping of customer property. This support service is capable
of adding value to the service package. Safekeeping includes childcare and pet- care services,
parking facilities, storage and baggage handling services etc. ( K. Rama Mohana Rao).
Responsible businesses pay close attention to safety and security issues for customers visiting
the firm‟s premises. Additional safekeeping services may involve physical products that
customers buy or rent. They may include packaging, pick-up and delivery, assembly,
installation, cleaning, and inspection. These services may be offered free or for an additional
fee.(Christopher Lovelock)

(iv) Exceptions: Service providers may be required to provide supplementary services- that
are not routine- to the customers on special considerations. Exceptions may be allowed on
special request by the customers for the advance delivery of service under special
circumstances. Exceptions also need to be granted to facilitate the problem solving. Many a
time, service firms face unexpected situations. Frontline employees of service firm should
respond quickly by deviating from the normal procedures to handle such a situation. In case
of accidents and emergencies, exceptions need to be granted(K. Rama Mohana Rao). There
are several types of expectations:-

a) Problem solving: Sometimes normal service delivery fails to run smoothly as result of
accident, delay, or a customer having difficulty in using a product.

b) Handling of complaints/ suggestions/ compliments: This activity requires well- defined

procedures. It should be easy for customers to express dissatisfaction, offer suggestions for
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improvement, or pass on compliments, and service providers should be able to make an

appropriate response quickly.

c) Special request: A customer may request a service that requires a departure from the
normal operating procedure. Advance request often relates to personal needs, including care
of children, dietary requirements, medical needs and personal disabilities

d) Restitution: Many customers expect compensation for serious performance failures; it

may take the form of repairs under warranty, legal settlements, refunds, or other form of
payment- in- kind (Christopher Lovelock)

The Service Product Mix

A service product mix is a set of services offered for sale by a company. The service mix of a
company can be assessed in terms of length, width, depth, and consistency.

1) Length of theService Mix: The length of a service product mix refers to the total number
of service items in the mix. (K. Rama Mohana Rao)

2) Width of the Service Mix: Width of the service mix is number of different service lines a
company is offering. The service width could be narrow or wide on the basis of
organizational objectives and capabilities and market expectations.

3) Depth of the Service Mix: The depth of the service product mix refers to the number of
variants offered in each service line. As the firms grow it find that its expertise in a particular
type of service can be exploited with little risk by expanding on number of variants of that
product. It is usually able to broaden its customer base by offering more type of services. This
causes higher cost of service alternation and processing of orders. In wide mix environment,
it becomes difficult for consumer to differentiate two service offerings. For example, it
become a difficult for a student to decide whether to select marketing or finance stream.

4) Consistency: The consistency of services product mix refers to how closely the service
lines are related to consumer perception, distribution channels and so on. Generally a
consistent mix is easily manageable compared to inconsistent one. In the consistent mix
environment, firms concentrate on marketing and service delivery expertise, create a strong
image and generate solid interpersonal relationships. (M.K. Rampal)
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Service-Product Life Cycle Management

Managers believe that every service product eventually dies, though there is no universal
possible life time for any service. Marketers believe that life of service product passes
through four stages. The characteristics of each stage are the same. The only difference lies in
strategies that can be used. Companies use sales and profits to identify the stages in a life
cycle. (K. Rama Mohana Rao) These stages are given below:

1) Introduction: A new service or a new form of current service is said to be in introductory

stage when it is first offered. As with goods, many new services never obtain acceptance by
consumers. An advantage that services have over goods is that many new services can be
introduced on a small scale and expanded if acceptance grows. This small scale introduction
reduces the financial risk associated with an introduction, making failure less costly. During
this stage most new services face few or no direct competition. This stage for a new service is
normally short. Successful introductions quickly move into the growth stage of service life
cycle while unsuccessful introduction fade away. To encourage the acceptance of a new
service, firms can use introductory promotional offers to get consumers to try the new
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service. For example, the offer may be 25%-off coupon, a special introductory price offer, or
a free trial usage period. (David L. Kurtz)

2) Growth: The Company sees the results of its efforts at this stage. The sales grow at a
faster rate, and promotional focus is on persuading target customers. Word-of-mouth
communication plays a significant role in image building. This stage is also known as a profit
generating stage. (K. Rama Mohana Rao) As there is increased potential for profit, more
firms enter the market. As competition increases, distinct market segments begin to emerge.
((David L. Kurtz) The profit curve peaks during this period. The end of the period indicates
the declining growth rate of the sales and increased intensity of competition. Service firms
strive hard to stretch this period to the longest possible.

3) Maturity: This stage of service life is marked by stabilization in turnover and downward
tendency of profit curve. Competition is severe, and firms need to invest heavily to match up
to the competitive threats in the area of the service modernization and sales promotion. The
increased expenses reduce the profit margin, and, as a result, the profit curve experiences a
downward slide. The end of the period is marked by an increased rate of decline in sales; the
profit curve reaches its lowest level. The service firms try to prolong this stage in a bid to
generate maximum possible profit. (K. Rama Mohana Rao)

4) Decline: During the decline stage the industry sales decline. This sale drop is often due to
new technology that has been developed. As demand is decreasing, many companies delete
the service from their portfolio, thus reducing the competition. In this stage, companies have
five options: divest, harvest, prune, retrenchment, or rejuvenate. When using the divestment
option the timing is a critical decision. A harvesting strategy implies the firm wants to reduce
expenditures as far as possible to extract as much profits from the service as possible. Pruning
strategy involves reducing the number of services offered by a firm. The most unprofitable
services are discontinued while the most profitable services are kept. It is a common strategy
for service operation. Retrenchment strategy involves selling of unprofitable accounts. This
strategy is good for large firms with multiple outlets and for the business-to-business service
sectors. Rejuvenation strategy is the process of finding a new a way of offering the service
that will appeal to firms target market. It is the most risky approach because it involves huge
cash outlay. Its goal is to push the lifecycle back into introductory stage. (David L. Kurtz)

Life-cycle management means learning to deal with changing technologies and systems,
initiating quality leadership, process management, shaping direction for the change, taking
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control and establishing the improvement process. With the advent of new process and design
techniques, current processes may need to be restructured, reprocessed or renovated to exploit
their maximum potential on product life cycle. Although service life- cycle concepts help in
planning and controlling the life of a service, they have very limited application in
formulating a future oriented service strategy. The pace of change in the environment and
market dynamics does not permit any service organization to plan and manage the various
stages in the service life cycle. Consequently, the life of service is becoming shorter and
shorter. Most service firms try to terminate service packages in the shortest possible time
frame, replacing it with the new service. The concern of firms has now been to maximize the
benefits of a new product in the shortest possible time rather than to visualize or to work on
strategies for an extended life.(K. Rama Mohana Rao)

Conclusion

The main focus of service marketer‟s activities is the product or service offered to the market.
A service product comprises all the elements of service performance that create value for the
customer, and it consists of a core product bundled with a variety of supplementary service
elements and their delivery processes. In mature industries, in which core service tends to be
become commoditized, the search for competitive advantage often centre‟s on creating new
supplementary services or significantly improving performance of existing ones. Many
strategic issues must be understood and decisions must be made to manage the assortments of
services offered. Designing a service product is a complex task that requires an understanding
of how the core and supplementary services should be combined, sequenced, delivered, and
branded to create a value proposition that meets the needs of target market segments. For this
purpose “Flower of Service”, branding strategies are used and new service development is
used as key tools for service product development. Different strategies are used by
organization at various stages of service life cycle such as : in case of introductory stage,
firms can develop prototypes, build brand; during growth stage firms can develop a
competitive advantage, firm loyalty; during maturity stage, firms can add complementary
services, reduce cost; while in decline stage, firms can use strategies such as harvesting,
disinvestment, pruning etc.