Lecture 3a

What are the components of a service product?

Core Product. ​The core is ‘what’ the customer is fundamentally buying, it is the
basic need-satisfying ability of the product while the supplementary enhances the
core. 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. Some core products are highly intangible
(eg. credit card & travel insurance products).

Supplementary Elements. Supplementing a service performance sometimes

involves increasing its complexity and adding in extra steps and interactions for the
customer. These augment the core product, both facilitating its use and enhancing
its value. Core products tend to become commoditized as an industry matures and
competition increases. In order to gain competitive advantage, firms often emphasize
supplementary services, which can play an important role in differentiating the core
product from competing services. Organisations need to be sensitive to the costs of
developing and implementing supplementary service elements versus the benefits
provided.
 The Flower of Service: A core product surrounded by clusters of supplementary
services

● Facilitating ​supplementary services are required either for service delivery or for
aid in the use of the core product.
● Enhancing ​supplementary services add extra value and appeal for customers.For
example, consultation and hospitality can be very important supplementary services
in a health-care context.

In a well-designed & well-managed service product, the petals & core are fresh and
well-formed. • Market positioning strategy helps to determine which supplementary
services should be included
Facilitating Supplementary Services
➤Information
To obtain full value from goods/services, customers often require information about
how to obtain and use a product/service.

Information includes the following:

Direction to service site, service hours, price info, terms & condition of sales/service,
reminders, warnings, documentation, confirmation of reservations, receipts and
tickets, notification of changes & summaries of account activities.
Traditional ways of providing information include using company websites, mobile
apps, front-line employees, self-service machines, signs, printed notices, and
brochures. Many business logistics companies offer shippers the opportunity to track
the movements of their packages, each of which has been assigned a unique
identification number. Eg. Amazon provides its customers with a reference number
that allows them to track the goods and know when to expect them.
➤Order Taking
Customers need to know what is available & may want to secure commitment to
delivery.

Order taking includes:

-​Order entry: ​(eg. on-site order entry, mail/telephone/email/web order),
-​Reservations or check ins: ​(eg. seats/tables/rooms, vehicles/equipment rental/
professional appointment)
-​Applications: (eg. Memberships in clubs/programs, subscription services (utilities),
prerequisite/enrolment-based services(financial credit, college enrolment)

Order entry can be received through sales personnel, by phone and e-mail, online,
or through a variety of other sources. 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. Technology can be used to make order taking and
reservations easier and faster for both customers and suppliers. For example,
airlines now make use of ticketless systems based on e-mail and mobile apps.
Customers receive a confirmation number when they make the reservation and need
only show identification (or the ticket as shown on a mobile app) at the airport to
claim their seats and receive a boarding pass. Banks, insurance companies, and
utilities require prospective customers to go through an application process so that
they can gather relevant information and screen out those who do not meet basic
enrolment criteria.
➤Billing
Bills should be clear, accurate and intelligible.

Billing can be:

Periodic statements of account activity, invoices for individual transactions, verbal
statements of amount due, online or machine display of amount due for self payment
transactions.

Busy customers hate to be kept waiting for a bill to be prepared in a hotel, a

restaurant, or a rental car lot. Many hotels and car rental firms have created express
check-out options, taking customers’ credit card details in advance and documenting
charges later by e-mail. However, accuracy is essential. Even though customers use
the express check-outs to save time, they certainly don’t want to waste time later
with corrections and refunds. An alternative express check-out procedure is used by
some car rental companies. An agent meets customers as they return their cars,
checks the mileage on the odometer and the fuel gauge readings, and then prints a
bill on the spot using a portable wireless terminal
➤Payment
Customers may pay faster and more cheerfully if you make transactions simple and
convenient for them.

Payment include:
-​Self-service​: (insert cash/card/token into machine, transfer funds electronically,
mail a check, enter a credit card number online)
-​Direct to payee/intermediary: (Cash handling/change giving, check handling,
credit card handling, coupon redemption)
-​Automatic Deduction from financial deposits: Automatic systems (eg. machine
readable tickets that operate entry gate) & human systems (eg. toll collectors)
Enhancing Supplementary Services
➤Consultation
Value can be added to goods and services by offering advice and consultation
tailored to each customer’s needs and situation. At its simplest, consultation consists
of advice from a knowledgeable service person in response to the request: “What do
you suggest?” Eg. you might ask your hairstylist for advice on different hairstyles and
products.

Examples of consultation include:

Customized advice, personal counselling, tutoring/training in product use,
management/technical consulting

Counseling r​ epresents a more subtle approach to consultation because it helps

customers understand their situations better and allows them to come up with their
“own” solutions and action programs. This approach can be a particularly valuable
supplement to services such as health treatment, where part of the challenge is to
get customers to make significant lifestyle changes and live healthily.

➤Hospitality
Hospitality-related services should ideally reflect pleasure at meeting new customers
& greeting old ones when they return. Well-managed businesses try to ensure that
their employees treat customers who invest time & effort in visiting a business &
using its services as welcome guests. Courtesy & consideration for customers’
needs apply to both face-to-face encounters and telephone interactions.
Hospitality elements include:
Greeting, food & beverages, toilets & washrooms, waiting facilities & amenities (eg.
waiting areas, weather protection, magazines, entertainment, newspapers),
transport, security.

Hospitality finds its fullest expression in face-to-face encounters. In some cases, it

starts (and ends) with an offer of transport to and from the service site on courtesy
shuttle buses. If customers must wait outdoors before the service can be delivered,
then a thoughtful service provider will offer weather protection. If customers have to
wait indoors, a waiting area with seating and even entertainment (TV, newspapers,
or magazines) may be provided to pass the time. Shoppers at Abercrombie & Fitch,
a global clothing retailer, are given a cheerful “hello” and “thank you” when they enter
and leave the store, even if they do not buy anything.
The quality of the hospitality services offered by a firm plays an important role in
determining customer satisfaction. This is especially true for people-processing
services because one cannot easily leave the service facility until the core service
has been delivered. Private hospitals often seek to enhance their appeal by
providing a level of room service that might be expected in a good hotel.

➤Safekeeping
Customers prefer not to worry about looking after the personal possessions that they
bring with them to a service site.

Safekeeping includes:
-Caring for possessions customer bring with them: ​Child care, pet care, parking
for vehicles, coat room, baggage handling, storage space, safe deposit boxes,
security personnel
-​Caring for Goods purchased (or rented) by customers: ​Packaging, pickup,
transportation & delivery, installation, inspection & diagnosis, cleaning, refueling,
preventive maintenance, repair & renovation
➤Exceptions
Exceptions ​involve supplementary services that fall outside the routine of normal
service delivery. Astute businesses anticipate such exceptions and develop
contingency plans and guidelines in advance. That way, employees will not appear
helpless and surprised when customers ask for special assistance. Customers
appreciate some flexibility when they make special requests and expect
responsiveness when things don’t go according to plan & well-defined procedures
make it easier for employees to respond promptly and effectively.

There are several types of exceptions:

-Special request in advance of service delivery: care of children, dietary
requirements, medical / disability needs and religious observance. Such requests are
particularly common in the travel and hospitality industries.
-​Handling special communication: ​Complaints, complements, suggestions
-​Problem solving: ​Warranties & guarantees, resolving difficulties that arise from
using the product, resolving difficulties caused by accidents, service failures,
assisting customers who have suffered an accident/ a medical emergency.
-​Restitution: ​Many customers expect to be compensated for serious performance
Failures. Eg.Refunds & compensation, free repair of defective goods.
Managerial implications
A company’s market positioning strategy helps to determine which supplementary
services should be included. High contact services typically have more
complementary services.Supplementary services hold strategic value as they create
a barrier to customer switching. A strategy of adding benefits to increase customers’
perceptions of quality will require more supplementary services than a strategy of
competing on price. Furthermore, offering progressively higher levels of
supplementary services around a common core may offer the basis for a product line
of differentiated offerings, such as the various classes of travel offered by airlines.
The various components of the Flower of Service can serve as a checklist in the
continuing search for new ways to augment existing core products and design new
offerings. Regardless of which supplementary services a firm decides to offer, all the
elements in each petal should receive the care and attention needed to consistently
meet defined service standards. That way, the resulting flower will always have a
fresh and appealing appearance.