3. SERVICE INNOVATION
• Radical Service Innovation
• Requires a different process and design
approach than incremental innovation
• Innovative service firms require enablers to
facilitate the process
• Nature of change will dictate where resources
are allocated
• Radical innovations imply increased risk and
resource investment
4. SERVICE SYSTEM DESIGN
• Service Decision Factors
• Facility Location (based upon proximity to
customers)
• Facility Layout (depends on the presence of the
customer at the location)
• Product and Process Design (Covers both the
intangible and tangible aspects of the service
offering)
• Scheduling (how the workers are assigned to the
service)
• Quality Control, Measures and Time Standards
(focus is on the needs of the customer)
5. SERVICE SYSTEM DESIGN
• Service Decision Factors
• Demand/Capacity Planning (depends on the
type of service and the immediacy of
matching supply to demand)
• Customer Contact Level (physical presence
and length of time that a customer spends
with a service provider)
• Industrialization (the substitution of technology
for people)
• Front Line Personnel Discretion (denotes the
flexibility of the service employee while
interacting with a customer)
6. SERVICE SYSTEM DESIGN
• Service Decision Factors
• Worker Skills (depend on service strategy and
concept, customer contact level and
industrialization level)
• Sales Opportunities (coincide with high
customer contact and employee discretion)
• Standardization of Service Offering (level of
uniformity provided in the service)
• Customer Participation (substitution of
consumer labor for provider labor)
7. SERVICE SYSTEM DESIGN AND
INNOVATION
• Supporting facilities must be in place prior
to offering a service
• Facilitating goods such as a product or
other tangible features are part of the
service
• Sensual and psychological benefits are
associated with the service offering
• Services might be bundled into one
supporting facility
• Must differentiate between core and
ancillary services
8. SERVICE SYSTEM DESIGN AND
INNOVATION
IndustrializationLevel
Low
High
Face to Face Delivery
Telephone or Courier
Delivery
Technology Based
Self-Service
Current Service Incremental Service
Innovation
Technology-Driven Service
Innovation
Radical Service
Innovation
Low High
Standardization of Service Offering
9. SERVICE SYSTEM DESIGN
TOOLS
• Service Blueprinting
• Design tool based on the process flow
diagram
• Delineate front office from back office
operations
• Determine standard or maximum execution
times, materials and the exact process for
each step
• Identify potential failure points and generate
mitigation plans to prevent or recover from a
failure
10. SERVICE SYSTEM DESIGN
TOOLS
Line of Visibility
Take Drink
Order
Collect
Payment
Deliver DrinkMake Drink
Order
Supplies
Prepare
Mixes
Materials
(Coffee, flavors,
milk, cups, etc.)
Fail
Poi
nt
Not seen by customer
Seen by customer
Service Blueprint for Espresso and Coffee Shop
11. SERVICE SYSTEM DESIGN
TOOLS
• Customer Utility Models
• Success depends upon customer’s
perceived utility or benefit provided by
the service’s price or non-price
attributes
• Promise of customer utility measurement
is the ability to optimize the design of a
service
• Satisfaction with the quality of service
affects customer loyalty and
repurchase intent
12. SERVICE SYSTEM DESIGN
TOOLS
• Customer Utility Models
• Service quality can be measured along
five principle dimensions
• Reliability, responsiveness, assurance,
empathy and the tangible aspect of the
service
• Improving reliability can result in increased
labor and training costs
• Responsiveness may be enhanced by reducing
queue times
• Empathy and assurance can be influenced by
the ability of service providers to convey
knowledge, courtesy and impressions of caring
• Enhancing the tangible attributes of a service
increases costs of consumables
13. SERVICE SYSTEM DESIGN
TOOLS
• Customer Utility Models
• Conjoint analysis (CJA) and discrete
choice analysis (DCA) are used to model
customer behavior
• Discrete choice experiments involve careful
design of service profile choice sets
• Design of a new airport restaurant requires the
following
• Identification of important attributes
• Specification of attribute levels
• Experimental design
• Presentation of alternatives of respondents
• Estimation of choice model
14. NEW SERVICE DESIGN FOR SNOWBIRD
SKI RESORT
Determine Appropriate Service Attributes
(e.g., Price, Service Time, Intangible, & Tangibles)
Determine all variables and costs related to Service Attributes
& demand -capacity matching strategies
Solve for Customer Segments and Utility Weights (βs)
using multinomial Logit or regression analysis
Collect Customer Attribute Information using
choice-based or ratings-based conjoint analysis
Feasibility
Evaluate Market
Share & Profit
& Profit
Profile N with
attributes,
price, and cost
Customer waiting
time
15. NEW SERVICE DESIGN FOR SNOWBIRD SKI
RESORT Ski Area A Features Ski Area B
Rugged terrain, sparsely forested, and
dramatic rock peaks Physical Setting
Rugged terrain, sparsely forested,
and dramatic rock peaks
40 minutes drive from home Distance 40 minutes drive from home
70 inches Snow Base 70 inches
12 inches new powder New Snow 12 inches new powder
3,250 feet Vertical Drop 3,250 feet
Groomed trails with glades and bowls Type of Runs Groomed trails only
35 ski runs Size of Area 35 ski runs
25% Advanced,, 50% Intermediate,
25% Beginner Challenge
25% Advanced,, 50% Intermediate,
25% Beginner
Ski shops, restaurants, night life,
boutiques, lodging Facilities
Ski shops, restaurants, night life,
boutiques, lodging
$50 per day Ticket Price $20 per day
30 minutes at peak time Lift Line Wait 30 minutes at peak time
Mostly triples and quads Type of Lifts Mostly triples and quads
Not allowed Snowboards Not allowed
Suppose the two ski areas described above were the only ones available for your next ski outing. Please
check () one box below to indicate what you would most likely do:
I would choose Ski Area A.
I would choose Ski Area B.
I would do something else and not ski.
16. SUMMARY
• Challenges to service design
• Intangible nature of service encounters
• Inability to prototype and test new
concepts
• Propensity to use ad-hoc methods
• Innovations come through
incremental and radical new services
• The two approaches address the same
factors (i.e. customer contact and
industrialization)
17. ETHICAL ISSUES
Ethics are moral guidelines which govern
good business practices/behavior. So
behaving ethically is doing what is morally
right. Behaving ethically in business is widely
regarded as good business practice.
Ethical Issues in Marketing:
• revolves around the 4p’s of marketing: •
product & packaging • price • placing
(distribution) • promotion (advertising &
branding)
18. 1. Product
• Consumer safety
• Product liability and reliability
• Designing for special needs.
2. Packaging
• Label information
• Packaging safety
• Environmental implication of packaging
19. 3. Price:
•Supra competitive pricing
•Price fixing
• Price skimming
• Price wars
•Price collusion (agreeing with other
competitors to set prices in a market
to the detriment of competition and
consumers
•Predatory pricing
20. • Predatory pricing• Price war• Dumping
(pricing policy)• Variable pricing
4 Placing (distribution)
•Targeting the vulnerable (e.g.
children, the elderly)
•Excluding potential customers
from the market (e.g. discouraging
demand from undesirable market
sectors or simply refusing to sell to
certain customers
21. •Paying vendors to carry a firms product
rather than one of its competitors are also
unethical. Most drug stores would give
too many drugs without prescription from a
qualified doctor are also unethical.
Products are moved in unsafe vehicles ,are
also unethical.
22. 5. Promotion (advertising &branding)
Ethical Issues in Advertising
• Puffery- False or exagerated praise
• Advertising to Children
• Promoting Unhealthy Products
• Subliminal Advertising-the use by
advertisers of images and sounds to
influence consumers' responses without
their being conscious of it.
• Deceptive Advertising- issues over
truth and honesty
. Issues with violence, sex and profanity
23. FACTS AND TV STATISTICS ( unethical
issues about advertising)
•A new survey conducted by the Pew
Research Center showed that 75% of the
1,505 adults polled from March 17-21 would
like to see tighter enforcement of government
rules on broadcast content, particularly when
children are most likely to be watching; 60%
want broadcast TV indecency standards
extended to cable TV; and 69% want higher
fines for media companies.
24. In a recent (03.20.13) Time Magazine Poll 53In a recent (03.20.13) Time Magazine Poll 53
percent of respondents said that they thinkpercent of respondents said that they think
the government should place stricter controlsthe government should place stricter controls
on broadcast-channel shows depicting sexon broadcast-channel shows depicting sex
and violence. 68 percent believe theand violence. 68 percent believe the
entertainment industry has lost touch withentertainment industry has lost touch with
viewers' moral standards. 66 percent saidviewers' moral standards. 66 percent said
there is too much violence on open-air TV, 58there is too much violence on open-air TV, 58
percent said too much cursing and 50 percentpercent said too much cursing and 50 percent
said there is too much sexual content on TV.said there is too much sexual content on TV.
49 percent say government regulation should49 percent say government regulation should
be extended to cover basic cable.be extended to cover basic cable.
25. Ethical issues in Marketing
1. Market research:
• invasion of privacy (e.g. obtaining research
data without permission)
•Stereotyping – drawing unfair or inappropriate
conclusions
26. 2. Target customers and market:
2.1 Targeting the vulnerable (e.g.
children, the elderly)
2.2 Excluding potential customers
from the market (e.g. discouraging
demand from undesirable market
sectors or simply refusing to sell to
certain customers
27. 3. Pricing
3.1 Price fixing
3.2 Price wars
3.3 Price collusion (agreeing with other
competitors to set prices in a market
to the detriment of competition and
consumers)
4. Advertising and promotion
4.1 Issues over truth and honesty
4.2 Issues with violence, sex and profanity
28. 4.3 Taste and controversy
4.4 Negative advertising
Price fixing is illegal. It is considered to be
anti-competitive as well as unethical
•Agree prices with its competitors (e.g. it
can't agree to work from a shared minimum
price list)
•Share markets or limit production to raise
prices (e.g. if two contracts are put out to
tender, one business can't agree that it will
bid for one and let a competitor bid for the
other)
29. • Impose minimum prices on different distributors
such as shops
• Agree with competitors what purchase price it
will offer suppliers
• Cut prices below cost in order to force a smaller
or weaker competitor out of the market
30. • Advertising in the UK is regulated by the
Advertising Standards Authority, which
regulates advertising across all media,
including TV, internet, sales promotions
and direct marketing. The ASA’s role is to
ensure ads are legal, decent, honest and
truthful by applying the Advertising
Codes.
