Chapter 14 New service innovation

1. Chapter 14 New service innovation

2. New service development (NSD) • Introduction • Growth in services • Technology and new services • Characteristics of services • Customer relationship process • New service innovations • NSD process • Summary & recap

3. Introduction • Growth in services • Characteristics of services • Services are processes where customer is part of it • Viewed differently to products • Services contribute to new business models: • eBay new way of conducting business • Ryanair new way of flying • Amazon new way of viewing and buying books • Napster new way to buy music

4. Growth in services – but what does this mean? Within the EU services now account for 60% of GDP (Eurostat, 2006). huge growth in coffee bars, smoothie bars and hair salons? Growth in knowledge intensive business services (KIBS) Since 2003, shares in oil companies have doubled. Halliburton and Schlumberger, the world market leader for oil services, have more than tripled.

5. Growth in services – but what doesthis mean? (Continued) So, a company that was earlier employing cleaners, decorators, maintenance workers, canteen staff, etc would now purchase the services of road and rail transport.

6. Outsourcing and service growth • Expected gains that companies can derive from outsourcing include: • the reduction of operational costs; • the ability to transform fixed costs into variable costs; • the ability to focus on core competencies; • access to the industry-leading external competencies and expertise.

7. Typology of services

8. Technology and new service development Technology has become the most significant enabler of innovation in services. Transforming the roles of both employees and customers. Easing the connectivity between service developers andcustomers. E.g. ebay . . .

9. Technology and new servicedevelopment (Continued) Founded in September 1995 eBay, Inc. is possibly the most successful web-based enterprise in existence.

10. A range of new services that also create new business models, where technology plays a key role

11. Characteristics of Services Services are co-produced by the customer Services are heterogeneous Services are intangible Services are processes Services are produced and consumed simultaneously Services are perishable Services cannot be transported

12. The customer relationship process Service quality Service value Customer value Services marketing Customer retention Customer satisfaction Relationship quality

13. New service innovation • As with products service, innovations can be classified • in many ways: • eBay was new to the market; Google’s on-line auctionis new to Google; • Internal process innovations, e.g. Amazon: delivering books to consumer is not new, but using internet; • Line extensions to services, e.g. banks offering insurance; • Service modifications, e.g internet access to airline passengers.

14. Typology for innovations (Ozdemir, 2007)

15. Customer roles in NPD (Nambisan, 2002)

16. The service innovation process • Different from NPD: customer is part of the process • Blueprinting the service • Identify every activity and every possible • outcome in the process • ‘Prick-eared’ market research • Direct contact facilitates dialogue • Service prototypes • Difficult because customer is part of process • Level of integration determines ability to prototype • E.g. a doctor’s home visit • a visit to the cinema

17. Customer interaction process Determinants Service encounter Service provider Customer Encounter management Customer roles Critical incidents

18. How do customers evaluate services? Perceived service quality . . . Perceived service value . . . Customer expectations . . . • Reliability • Responsiveness • Assurance • Empathy • Tangibles

19. Reliability • Providing service as promised • Dependability in handling customers’ problems • Performing services right first time • Performing services at the promised time • Maintaining error free records • Responsiveness • Keeping customer informed when service will be performed • Prompt service to customers • Willingness to help customers • Readiness to respond to customers’ requests • Assurance • Employees who instil confidence in customers • Making customers feel safe in their transactions • Employees who are consistently courteous • Employees who have knowledge to answer questions

20. Empathy • Giving customers individual attention • Employees who deal with customers in a caring manner • Having the customers best interests at heart • Employees who understand the needs of their customers • Convenient business hours • Tangibles • Modern equipment • Visually appealing facilities • Employees who have neat, professional appearance • Visually appealing materials associated with service

21. Categories of service mix • Pure tangible good • Tangible good with accompanying services • Hybrid • Major service with accompanying minor goodsand services • Pure service

22. New service innovation For many years the literature overlooked this concept! Innovation deemed to require a new physical “thing” But, the world of business suggested new services coulddeliver even more significant changes (new businessmodels): First Direct Ryanair eBay Apple’s iTunes

23. The End Thank you for listening