creating service product service sector mgnt

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Prof. Hemant Kombrabail

CREATING THE SERVICE PRODUCTAll service organizations face choices about the types of products to offer and the operational procedures to use in creating them. In a customer-focused organization, these choices are often driven by market factors, with firms seeking to respond to the expressed needs of specific market segments and to differentiate the characteristics of their offerings against those of competitors. The availability of new delivery processes, such as the Internet for information-based services, allows firms to create for their existing services new methods of delivery that effectively change the nature of the service experience and create new benefits. The growth of Internet banking is a case in point. A more radical form of product innovation involves exploiting technological developments to satisfy latent needs that customers have not previously articulated or even recognized. A service product typically consists of a core product bundled with a variety of supplementary service elements. The core elements respond to the customers' need for a basic benefit, such as transportation to a specific location, resolution of a specific health problem, a professional solution to a problem, or repair of malfunctioning equipment. Supplementary services facilitate and enhance use of the core service. They range from provision of needed information, advice, and documentation to problem solving and acts of hospitality. Designing new services is a challenging task because it requires thinking about processes, people, and experiences; as well as outputs and benefits. Processes can be depicted through blueprints that specify employee tasks and operational sequences, as well as track the experience of the customer at each step in service delivery. In designing a service a service provider should explore the following questions 1. What are the key ingredients in a service product? 2. How can we categorize the supplementary services that surround core products? 3. What are some of the approaches that can be used in designing new services? 4. What is the role of branding for service products? Planning And Creating Services What do we mean by a service "product"? Earlier we noted that a service is a "performance" rather than a "thing." When they purchase manufactured goods, customers take title to physical objects. But service performances, being intangible and ephemeral, are experienced rather than owned. Even when there are physical elements to which the customer does take title, such as a cooked meal (which is promptly consumed), a pacemaker implanted in a patient's body, a replacement part inside a car, a significant portion of the price paid by the customer is for the value added by the accompanying service elements, including labor and expertise and the use of specialized equipment When they are required by the nature of the service process to visit the service site - as in people -processing services - or choose to do so in other types of services such as traditional retail bank branches - customers may be asked to participate actively in the process of service creation and delivery. If customers perform self-service, their experiences are often shaped by the nature and user friendliness (or lack thereof!) of the supporting technology. In both instances, evaluations of the service product are likely to be much more closely interwoven with the nature of the delivery process than is the case for manufactured goods. 1

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Key Steps In Service Planning One of the challenges in services marketing is to ensure that the task of product management maintains a strong customer focus at all times. Historically, operations management was often allowed to dominate this task, with the result that customer concerns were sometimes subjugated to operational convenience. On the other hand, marketers cannot work in isolation on new-product development, especially when its delivery entails use of new technologies; marketers need to form a partnership with operations personnel and, in the case of high-contact services, with human resource managers as welt Figure below outlines the key steps involved in planning and creating services, emphasizing the need for managers to relate market opportunities to deployment of their firms' resources: physical, technological, and human

Planning And Creating Services 2

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The task begins at the corporate level with a statement of objectives. This statement leads into a detailed market and competitive analysis, addressing each of the markets in which the firm is involved or thinking of entering. Paralleling this step is a resource allocation analysis, requiring definition and appraisal of the firm's resources and how they are being allocated, as well as identification of additional resources that might reasonably be obtained. This pair of steps can be thought of collectively as a form of SWOT analysis, identifying strengths, weaknesses, opportunities, and threats on both the marketing and operational/human resources fronts. Each leads to a statement of assets. The marketing assets statement includes details of the firm's existing customer portfolio (including its size, profile, and value), knowledge of the market and competitors, its product line, the reputation of its brand(s), its marketing implementation skills, and its positioning strategy / strategies. A positioning statement can be developed for each service that the firm offers to one or more target market segments, indicating the characteristics that distinguish that service from competitive offerings. The marketing opportunities revealed by this analysis must now be matched against an operating assets statement. Can the organization afford to allocate the physical facilities, equipment, information technology, and human resources needed to market existing service products more effectively, add enhancements designed to improve competitive appeal, or create new service offerings? Conversely, does an analysis of these operating assets suggest new opportunities to improve their utilization in the marketplace? If it lacks the resources needed for a new marketing initiative, could the firm leverage its existing assets by partnering with intermediaries or even with customers themselves? Finally, does an identified marketing opportunity promise sufficient profits to yield an acceptable return on the assets used after deducting all relevant costs? From a marketing perspective, the next step in transforming an opportunity into reality involves creating a service-marketing concept to clarify the benefits offered to customers and the costs they will incur in return. This marketing concept considers both core and supplementary services, their characteristics in terms of both performance level and style, and where, when, and how customers will be able to have access to them. The related costs of service include not only money but also definition of the amount of time, mental hassle, physical effort, and negative sensory experiences likely to be incurred by customers in receiving service. A parallel step is to establish a service operations concept, which stipulates the nature of the processes involved (including use of information technology) and how and when the various types of operating assets should be deployed to perform specific tasks. Hence the need to define the geographic scope and scheduling of operations, describe facilities design and layout, and identify the human resources required. The operations concept also addresses opportunities for leveraging the firm's own resources through use of intermediaries or the customers themselves. Finally, the operations concept clarifies which tasks and resources will be assigned to front-stage and which to backstage operations. Defining the marketing and operations concepts is necessarily an interactive process, as either or both may have to be modified in order to bring the two into the harmony needed to proceed with a given service offering. The planning task then moves on to a set of choices that management must make in configuring the service delivery process. 3

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The Augmented Product Most service businesses offer their customers a package of benefits involving delivery of not only the core product but also a variety of service-related activities that we refer to collectively as supplementary services. Increasingly the latter provide the differentiation that separates successful firms from the also-rans. Among both services and goods, the core product tends to become a commodity as competition increases and the industry matures. (If a firm can't do a decent job on the core elements, it will eventually go out of business!) Although, managers continually need to consider opportunities to improve the core product, the search for competitive advantage in a mature industry often emphasizes performance on the supplementary services that are bundled with the core product The combination of core product and supplementary services is often referred to as the augmented product. Several frameworks can be used to describe augmented products in a services context. Lynn Shostack developed a molecular model (see figure), which uses a chemical analogy to help marketers visualize and manage what she terms a "total market entity." Her model can be applied to either goods or services. At the center is the core benefit, addressing the basic customer need, linked to a series of other service characteristics. She argues that, as in chemical formulations, a change in one element may completely alter the nature of the entity. Surrounding the molecules are series of bands representing price, distribution, and market positioning (communication messages). Shostacks Molecular Model: Passenger Airline Service The molecular model helps us to identify the tangible and intangible elements involved in service delivery. In an airline, for example, the intangible elements include

transportation itself, service frequency, and pre-, in-, and post-flight service. But the aircraft and the 4

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food and drinks that are served are all tangible. By highlighting tangible elements, marketers can determine whether their services are tangible dominant or intangible dominant. The greater the proportion of intangible elements, the more necessary it is to provide tangible clues about the features and quality of the service. Pierre Eiglier and Eric Langeard proposed a model (see below) in which a circle containing a series of supplementary services that are specific to that particular product surrounds the core service. Their approach, like Shostack's, emphasizes the interdependence of the various components whose elements needed to facilitate use of the core service (such as the reception desk at a hotel) are distinguished from those that enhance the appeal of the core service (such as a fitness center and business services at a hotel).

Check-in Parking Spend the Night in Room Bell Boy

Checkout

Food

Business Center Eiglier and Langeard Model: Motel Stay Both models of the augmented product offer useful insights. Shostack wants us to determine which service elements are tangible and which are intangible, in order to help formulate product policy and communication programs. Eiglier and Langeard ask us to think about two issues: (1) Whether supplementary services are needed to facilitate use of the core service or simply to add extra appeal (2) Whether customers should be charged separately for each service element or whether all elements should be bundled under a single price tag. Further insight is provided by Christian Grnroos, who clarifies the various roles played by supplementary services, describing them as either facilitating services (or goods) and supporting services (or goods).

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Core Services - Lodging And Room Service

Facilitating Services - Bellboy service Grnroos Model: Hotel

Supporting Services - Health Club, Car Rental, Business Center

Defining the Nature of the Service Offering When designing a service to implement a particular service-marketing concept, product planners need to take a holistic view of the entire performance they want customers to experience. The design task must therefore address and integrate three key components The core product Supplementary services Delivery processes. Core Product This central component addresses two questions (1) What is the buyer really purchasing? (2) What business are we in? The core product supplies the central problem-solving benefits that customers seek. Thus, transport solves the need to move a person or a physical object from one location to another; management consulting is expected to yield expert advice on the actions that a company should take; and repair services restore a damaged or malfunctioning machine or building to good working order. Supplementary Services These elements augment the core product, both facilitating its use and enhancing its value and appeal. The extent and level of supplementary services often play a role in differentiating and positioning the core product. Adding supplementary elements or increasing the level of performance can add value to the core product and enable the service provider to charge a higher price. 6

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Delivery Process The third component deals with the procedures used to deliver both the core product and each of the supplementary services. In its broadest design of the service offering must address how the various service components are delivered to the customer, the nature of the customer's role in those processes, how long delivery lasts, and the prescribed level and style of service to be offered. Each of the four categories of processes - people processing, possession processing, mental stimulus processing, and information processing - has different implications for customer involvement, operational procedures, the degree of customer contact with service personnel and facilities, and requirements for supplementary services. The integration of these three components is captured in figure below, which illustrates the service offering for an overnight stay at a hotel.

Depicting The Service Offering for an Overnight Hotel Stay The core product - overnight rental of a bedroom - is dimensioned by service level, scheduling (how long the room may be used before another payment becomes due), the nature of the process (in this instance, people processing), and the role of the customers in terms of what they are expected to do for themselves and what the hotel will do for them, such as making the bed, supplying bathroom towels, and cleaning the room.

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Surrounding the core is an array of supplementary services, ranging from reservations to meals to inroom service elements. As with the core product, delivery processes must be specified for each of these elements. The more expensive the hotel, the higher the level of service on each element (for example, covered parking with valet assistance, better food, and a broader array of movies on Pay TV). Additional services might also be offered, such as a business center, a bar, a pool, and a health club. One of the characteristics of a top-of-the line hotel is doing things for customers that they might otherwise have to do for themselves and providing an extended schedule for service delivery, including 24-hour room service. Documenting the Delivery Sequence over Time A fourth design component that product planners must address is the probable sequence in which customers will use each of the core and supplementary services and the approximate length of time that will be required in each instance. This information, which should reflect a good understanding of customer needs, habits, and expectations, is necessary for not only marketing purposes but also facilities planning, operations management and personnel allocation. It would be a mistake to assume that the customer consumes all the elements of the augmented product simultaneously. In the hotel industry, neither the core service nor its supplementary elements are all delivered continuously throughout the duration of the service performance. Certain services must necessarily be used before others. In many services, in fact, consumption of the core product is sandwiched between use of supplementary services that are needed earlier or later in the delivery sequence.

Temporal Dimension to Augmented Hotel Product Figure above adds a temporal dimension to the various elements of the augmented hotel product, identifying when and for how long they are consumed. The example illustrated is hotel accommodation, a high-contact, people-processing service. Time plays a key role in services both from an operational standpoint as it relates to allocating and scheduling purposes and from the perspective of customers themselves.

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An important aspect of service planning is determining an appropriate amount of time for the customer to spend on various service elements. In some instances, research may show that customers from a given segment expect to budget a specific amount of time for a given activity that has value for them and would not wish to be rushed (for instance, 8 hours for sleeping, an hour and a half for a business dinner, and 20 minutes for breakfast). In other instances, such as making a reservation, checking in, payment, or waiting for a car to be retrieved from valet parking, customers may wish to minimize or even eliminate time spent on what they perceive as nonproductive activities. As suggested in Service Perspectives, speedy service is often a key product attribute for customers, and implementation requires an understanding of both marketing and operational considerations. Identifying And Classifying Supplementary Services The more we examine various types of services, the more we find that most of them have many supplementary services in common. Flowcharting offers an excellent way to understand the totality of the customer's service experience and identify the many types of supplementary services accompanying a core product. For instance, supplementary services at an expensive restaurant include reservation, valet parking, coatrooms, cocktails, being escorted to a table, ordering from the menu, billing, payment and use toi1ets. If you prepare flowcharts for a variety of services, you will soon notice that although core products may differ widely, common supplementary elements - from information to billing and from reservations / order taking to problem resolution - keep recurring. Of the potentially dozens of supplementary services, almost all of them can be classified into one of the following eight clusters. We list them as either facilitating or enhancing supplementary services. Facilitating Services Information Order taking Billing Payment Enhancing Services

Consultation Hospitality Safekeeping Exceptions

In the figure on the next page these eight clusters are displayed as petals surrounding the center of a flower, which is called the Flower of Service The clusters have been shown clockwise in the sequence in which they are often likely to be encountered by customers, although this sequence may vary; for instance, payment may have to be made before rather than after service is delivered. Welldesigned and well-managed service organization, the petals and core are fresh and well formed. A badly designed or poorly executed service is like a "flower with missing, wilted, or discolored petals. Even if the core is perfect, the overall impression of the flower is unattractive. Think about your own experiences as a customer or when purchasing on behalf of an organization, when you were dissatisfied with a particular purchase, was it the core that was at fault, or was it a problem with one or more of the petals?

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The Flower of Service A company's market positioning strategy helps to determine which supplementary services should be included. A strategy of adding benefits to increase customers' perceptions of quality will probably require more supplementary services (and also a higher level of performance on all such elements) than a strategy of competing on low prices. Firms that offer several grades of service - such as first class, business class, and economy class in an airline context - often differentiate them by adding extra supplementary services for each upgrade in service. Information To obtain full value from any good or service, customers need relevant information (see below). New customers and prospects are especially information hungry. Customers' needs may include directions to the site where the product is sold (or details of how to order it), service hours, prices, and usage instructions. Further information, sometimes required by law could include conditions of sale and use, warnings, reminders, and notification of changes. Finally, customers may want documentation of what has already taken place, such as confirmation of reservations, receipts and tickets, and monthly summaries of account activity. Examples of Information Elements Directions to service site Schedules / service hours Prices Instructions on using core products / supplementary services Reminders 10

TYBMS - SEM V Warnings Conditions of sale / service Notification of changes Documentation Confirmation of reservations Summaries of account activity Receipts and tickets


Companies should make sure that the information they provide is both timely and accurate, as incorrect information may annoy or inconvenience customers. Traditional ways of providing information to customers include using front-line employees (who are not always as well informed as customers might like), printed notices, brochures, and instruction books. Other information media are videotapes or software-driven tutorials, touch-screen video displays, and menu-driven recorded telephone messages. The most significant recent innovation has been corporate use of Web sites. Examples of useful applications are train and airline schedules and hotel details, assistance in locating specific retail outlets, such as restaurants and stores, and information on the services of professional firms. 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. Order Taking Once customers are ready to buy, a key supplementary element comes into play: accepting applications, orders, and reservations (see below). 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 easier and faster for both customer and suppliers. The key lies in minimizing the time and effort required of both parties, while also ensuring completeness and accuracy. Examples of Order Taking Elements Applications Membership in clubs or programs Subscription services (e.g., utilities) Prerequisite-based services (e.g., financial credit, college enrollment) Order Entry On-site order fulfillment Mail / telephone order placement E-mail / Web site order placement Reservations and Check-in Seats Tables Rooms Vehicles or equipment rental Professional appointments Admission to restricted facilities (e.g., museums, aquariums) 11

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Banks, insurance companies, and utilities require prospective customers to go through an application process designed to gather relevant information and to screen out those whose credit records or serious health problems do not meet basic enrollment criteria. Universities also require prospective students to apply for admission. Reservations, including appointments and check-in, are a special type of order taking that entitles customers to a specified unit of service, such as an airline seat, a restaurant table, a hotel room, time with a qualified professional or admission to a theater or sports arena with designated seating. Accuracy in scheduling is vital; reserving seats for the wrong day is likely to be unpopular with customers. Ticketless systems, based on telephone or web site reservations, provide enormous cost savings for airlines, as there is no travel agent commission - customers book directly - and the administrative effort is drastically reduced. A paper ticket at an airline may be handled 15 times whereas an electronic ticket requires only one step. But the paperless process disenchants some customers. Although they receive a confirmation number by phone when they make the reservations and need only to show identification at the airport to claim their seats, many people feel insecure without tangible proof that they have a seat on a particular flight And business travelers complain that needed receipts don't arrive until days or sometimes weeks after a trip, causing problems claiming expenses from corporate accounting departments. Some airlines now offer to fax receipts and itineraries on request at the time a flight is booked. Billing Billing is common to almost all services, unless the service is provided free of charge. Inaccurate, illegible, or incomplete bills risk disappointing customers who may up to that point have been quite satisfied with their experience. Such failures add insult to injury if the customer is already dissatisfied. Billing should also be timely because it serves to stimulate faster payment. Procedures range from verbal statements to a machine-displayed price and from handwritten invoices to elaborate monthly statements of account activity and fees (see below). Perhaps the simplest approach is self-billing, when the customer tallies up the amount of an order and either encloses a check or signs a credit card payment authorization. In such instances, billing and payment are combined into a single act, although the seller may still need to check for accuracy. Examples of Billing Elements Periodic statements of account activity Invoices for individual transactions Verbal statements of amount due Machine display of amount due Self-billing (computed by customer) More and more, billing is being computerized. Despite the potential for productivity improvements, computerized billing has its dark side, as when an innocent customer tries futilely to contest an inaccurate bill and is met by an escalating sequence of ever larger bills (compounded interest and penalty charges), accompanied by increasingly threatening, computer-generated letters. Customers usually expect bills to be clear, informative, and itemized in ways that make it clear how the total was computed. Unexplained, unfathomable symbols that have all the meaning of hieroglyphics on an Egyptian monument (and are decipherable only by the high priests of accounting and data processing) do not create a favorable impression of the supplier. Nor does fuzzy printing or 12

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illegible handwriting. Laser printers, with their ability to switch fonts and typefaces and to box and to highlight: can produce statements that not only are more legible but also organize information in more useful ways. Marketing research can help here, by asking customers what information they want and how they would like it to be organized. American Express (AmEx) built its Corporate Card business by offering companies detailed documentation of the spending patterns of individual employees and departments on travel and entertainment Intelligent thinking about customer needs led AmEx to realize that well-organized information has value to a customer, beyond simply the basic requirement of knowing how much to pay at the end of each month. Busy customers hate to be kept waiting for a bill to be prepared in a hotel, restaurant, or rental car lot. Many hotels and rental car firms have now created express check-out options, taking customers' credit card details in advance and documenting charges later by mail But accuracy is essential customers use the express checkouts to save time, they certainly don't want to waste time later seeking corrections and refunds. Some car rental companies use an alternative express checkout procedure. An agent meets customers as they return their cars, checks the mileage / kilometrage and fuel gauge readings, and then prints a bill on the spot, using a portable wireless terminal. Many hotels push bills showing charges to date under guestroom doors on the morning of departure; others offer customers the option of previewing their bills on the TV monitors in their rooms before checkout. Payment In most cases, a bill requires the customer to take action on payment, and such action may be very slow in coming One exception is bank statements that detail charges that have already been deduced from the customer's account. Increasingly, customers expect ease and convenience of payment, including credit, when they make purchases in their own countries and while traveling abroad. Examples of Payment Elements

Self Service Exact change in machine Cash in machine with change returned Insert prepayment card Insert credit / charge / debit card Insert token Electronic funds transfer Mail a cheque Enter credit card number online Direct to Payee or Intermediary Cash handling and change giving Cheque handling Credit / charge / debit card handling Coupon redemption Tokens, vouchers, etc, 13

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Automatic Deduction from Financial Deposits (e.g., bank charges) Control and Verification Automated systems (e.g., machine-readable tickets that operate entry gates) Human systems (e.g., toll collectors, ticket inspectors) A variety of options exist to facilitate customer bill paying (see below). Self-service payment systems, for instance, require customers to insert coins, bank notes, tokens or cards in machines. But equipment breakdowns destroy the whole purpose of such a system, so good maintenance and rapidresponse troubleshooting are essential. Much payment still takes place through hand-to-hand transfers of cash and checks, but credit and debit cards are growing in importance as more and more establishments accept them. Other alternatives are tokens, vouchers, coupons, or prepaid tickets. Films benefit from prompt payment, as it reduces the amount of accounts receivable. To reinforce good behavior, NStar, a Massachusetts electrical utility, periodically sends thank you notes to customers who have consistently paid on time To ensure that people pay what is due, some service businesses have instituted control systems, such as ticket checks before entering a movie theater or on board a train. However, inspectors and security officers must be trained to combine politeness with firmness in performing their jobs, so that honest customers do not feel harassed. But a visible presence often serves as a deterrent. Consultation Now we move to enhancing supplementary services, led by consultation. In contrast to information, which suggests a simple response to customers' questions (or printed information that anticipates their needs), consultation involves a dialogue to probe customer requirements and then to develop a tailored solution. Given below are examples of several supplementary services in the consultation category. Examples of Consultation Elements Advice Auditing Personal Counseling Tutoring / Training in product use Management or Technical Consulting At its simplest, consultation consists of immediate advice from a knowledgeable service person in response to the request: What do you suggest? (For example, you might ask the person who cuts your hair for advice on different hairstyles and products. Effective consultation requires an understanding of each customer's current situation before suggesting a suitable course of action. Good customer records can be a great help in this respect, particularly if relevant data can be retrieved easily from a remote terminal. Counseling represents a more subtle approach to consultation because it involves helping customers better understand their situations so that they can come up with their own solutions and action programs. This approach can be a particularly valuable supplement to such services as health treatment, when part of the challenge is to get customers to take a long-term view of their personal situation and to adopt more healthful behaviors, often involving some initial sacrifice. For example, 14

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diet centers, such as Weight Watchers, use counseling to help customers change behaviors so that weight loss can be sustained after the initial diet is completed. Finally, there are more formalized efforts to provide management and technical consulting for corporate customers, such as the "solution selling" associated with marketing expensive industrial equipment and services. The sales engineer researches the customer's situation and then offers objective advice about what particular package of equipment and systems will yield the best results for the customer. Some consulting services are offered free of charge in the hope of making a sale. However, in other instances, the service is "unbundled," and customers are expected to pay for it. Advice can also be offered through tutorials, group training programs, and public demonstrations. 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 that their employees treat customers as guests, Courtesy and consideration for customers' needs apply to both face-to-face encounters and telephone interactions (see below). Examples of Hospitality Elements Greeting Food and beverages Toilets and washrooms Waiting facilities and amenities o Lounges, waiting areas, seating o Weather protection o Magazines, entertainment, newspapers Transport Security Hospitality finds its full expression in face-to-face encounters. In some cases, it starts and ends with an offer of transport to and from the service site, as with courtesy shuttle buses. If customers must wait outdoors before the service can be delivered, a thoughtful service provider will offer weather protection; if indoors, a waiting area with seating and even entertainment (TV, newspapers, or magazines) to pass the time. Recruiting employees who are naturally warm, welcoming, and considerate for customer-contact jobs helps to create a hospitable atmosphere. The quality of the hospitality services offered by a firm can increase or decrease satisfaction with the core product. This is especially true when customers cannot easily leave the people-processing service facility. Private hospitals often seek to enhance their appeals by providing the level of room service, including meals that might be expected in a good hotel. Some airlines seek to differentiate themselves from their competitors with better meals and more attentive cabin. Crew. Singapore Airlines is well recognized on both counts. Although preflight and in-flight hospitality is important, an airline journey doesn't end until passengers reach their final destination. Air travelers have come to expect departure lounges, but British Airways (BA) came up with the novel idea of an arrivals lounge for its terminals at London's Heathrow and Gatwick airports to serve passengers arriving early in the morning after a long 15

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overnight flight from the Americas, Asia, Africa, and Australia. BA offers holders of first- and business-class tickets or a BA Executive Club gold card (awarded to the airline's most frequent flyers) the opportunity to use a special lounge where they can take a shower, change, have breakfast, and make phone calls or send faxes before continuing to their final destination, feeling a lot fresher. It's a nice competitive advantage, which BA has actively promoted. Other airlines have since felt obliged to copy it. Failures in hospitality extend to the physical design of the areas where customers wait prior to receiving service. A survey found that unappealing offices and lack of creature comforts could drive away patients of cosmetic surgeons. Safekeeping While visiting a service site, customers often want assistance with their personal possessions. In fact, unless certain safekeeping services are provided, such as safe and convenient parking for their cars, some customers may not come at all. The list, of potential on-site safekeeping services is long and includes provision of coatrooms, baggage transport, handling, and storage; safekeeping of valuables; and even childcare and pet care (see below). Examples of Safekeeping Elements Caring for Possessions Customers Bring with Them Childcare Pet care Parking facilities for vehicles Valet parking Coatrooms Luggage-handling Storage space Safe deposit boxes Security personnel Caring for Goods Purchased (or Rented) by Customers Packaging Pickup Transportation Delivery Installation Inspection and diagnosis Cleaning Refueling Preventive maintenance Repairs and renovation Upgrade

Exceptions Exceptions involve supplementary services that fall outside the routine of normal service delivery (see below). Astute businesses anticipate exceptions and develop contingency plans and guidelines in 16

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advance. That way, employees will not appear helpless and surprised when customers ask for special assistance. Well-defined procedures make it easier for employees to respond promptly and effectively. Examples of Exceptions Elements Special Requests in Advance of Service Delivery Children's needs Dietary requirements Medical or disability needs Religious observances Deviations from standard operating procedures Handling Special Communications Complaints Compliments Suggestions Problem Solving Warranties and guarantees against product malfunction Resolving difficulties that arise from using the product Resolving difficulties caused by accidents, service failures, and problems with staff or other customers Assisting customers who have suffered an accident or medical emergency Restitution Refunds Compensation in kind for unsatisfactory goods and services Free repair of defective goods There are several types of exceptions Special Requests A customer may request service that requires a departure from normal operating procedures. Advance requests often relate to personal needs, including care of children, dietary requirements, medical needs, religious observance, and personal disabilities. Such special requests are common in the travel and hospitality industries Problem solving. Situations arise when normal service delivery (or product performance) fails to run smoothly, as a result of accidents, delays, equipment failures, or customers' experiencing difficulty in using the product Handling of complaints/suggestions/compliments. This activity requires well defined procedures. It should be easy for customers to express dissatisfaction, offer suggestions for improvement, or pass on compliments, and service providers should be able to make an appropriate response quickly 17

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Restitution. Many customers expect to be compensated for serious performance failures. Compensation may take the form of repairs under warranty, legal settlements, refunds, an offer of free service, or other forms of payment-in-kind. Managers need to keep an eye on the level of exception requests. Too many requests may indicate that standard procedures need revamping For instance, if a restaurant continually receives requests for special vegetarian meals, because none are on the menu, perhaps it's time to revise the menu to include atleast one such dish. A flexible approach to exceptions is generally a good idea because it reflects responsiveness to customer needs. On the other hand, having too many exceptions may compromise safety, negatively impact other customers, and overburden employees. Managerial Implications The eight categories of supplementary services forming the Flower of Service collectively provide many options for enhancing the core product, whether it is a good or a service. Most supplementary services do (or should) represent responses to customer needs. As noted earlier, some are facilitating services, such as information and reservations that enable customers to use the core product more effectively. Others are "extras" that enhance the core product or even reduce its non-financial costs (for example, meals, magazines, and entertainment are hospitality elements that help pass the time). Some elements - notably billing and payment - are, in effect, imposed by the service provider. But even if not actively desired by the customer, they still form part of the overall service experience. Any badly handled element may negatively affect customers' perceptions of service quality. The "information" and "consultation" petals illustrate the emphasis in this book on the need for education as well as promotion in communicating with service customers. Not every core product will be surrounded by a large number of supplementary services from all eight petals. People-processing services - especially hospitality - tend to be the most demanding in terms of supplementary elements, as they involve close (and often extended) interactions with customers. When customers do not visit the service factory, the need for hospitality may be limited to simple courtesies in letters and telecommunications. Possession-processing services sometimes place heavy demands on safekeeping elements, but there may be no need for this particular petal when providing information-processing services in which customers and suppliers deal entirely at arm's length. Financial services that are provided electronically are an exception to this, however; companies must ensure that their customers' intangible financial assets are carefully safeguarded in transactions that occur via phone or the Web. Managers face many decisions about what types of supplementary services to offer, especially in relation to product-policy and positioning issues. A study of Japanese, American, and European firms serving business-to-business markets found that most companies simply added layers of services to their core offerings without knowing what customers really valued.6 Managers surveyed in the study indicated that they did not understand which services should be offered to customers as a standard package accompanying the core and which ones could be offered as options for an extra charge, Without this knowledge, developing effective pricing policies can be tricky. No simple rules govern pricing decisions for core products and supplementary services. But managers should continually review their own and competitors' policies to make sure that they are in line with both market practice and customer needs.

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In summary, the examples shown above can serve as checklists in the continuing search for new ways to augment existing core products and to design new offerings. The lists provided in these eight tables do not claim to be all encompassing, as some products may require specialized supplementary elements. In general, a firm that competes on a low cost, no-frills basis will require fewer supplementary elements than one marketing an expensive, high-value-added product. Alternative levels of supplementary services around a common core may offer the basis, for a product line of differentiated offerings, similar to the various classes of travel offered by airlines. 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 rather than looking wilted or disfigured by neglect.

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