Types of New Services
- Radical Innovations:
- Definition: These are entirely new to the world and represent a significant leap forward in technology or service delivery.
- Example: Federal Express introduced overnight courier delivery, which was a new concept at the time.
- Impact: Can create entirely new markets and redefine industry standards.
- New Service Offerings:
- Definition: Services that a company begins offering which it did not previously provide.
- Example: Barnes & Noble, originally a bookseller, added coffee services to enhance the customer experience.
- Impact: Expands the company’s service portfolio and potentially increases customer loyalty.
- Service-Line Extensions:
- Definition: Adding new services to an existing line or expanding the scope of services within the company’s current offerings.
- Example: An airline introducing new routes or destinations.
- Impact: Allows companies to leverage existing infrastructure and customer base for growth.
- Service Improvements:
- Definition: Enhancements made to existing services to increase their value or quality.
- Example: Adding internet facilities to hotel rooms.
- Impact: Improves customer satisfaction and competitiveness by keeping up with industry standards.
- Style Changes:
- Definition: Modifications in the presentation or appearance of a service.
- Example: Redesigning a company’s website or changing the color scheme of a restaurant’s decor.
- Impact: Refreshes the brand image and can attract new customers or re-engage existing ones.
Reasons for Failure and Success
- Reasons for Failure:
- No Unique Benefits: The service does not offer any distinct advantages over existing options.
- Insufficient Demand: The market size is too small or the service doesn’t address a significant need.
- Unrealistic Goals: Overly ambitious targets that are not achievable.
- Poor Fit: The new service does not align well with the company’s existing services or brand.
- Poor Location: The service is offered in a location that does not have sufficient demand.
- Insufficient Financial Backing: Lack of funding to support development and marketing.
- Rushed Development: Inadequate time spent on planning and execution.
- Reasons for Success:
- Customer Needs: The service addresses a clear customer need and offers significant benefits.
- Competitive Advantage: Provides a unique edge over competitors.
- Technological Sophistication: Utilizes advanced technology to enhance the service.
- Dedicated Resources: Investment in R&D, human resources, and marketing expertise.
- Market Absorption: There is a proven potential for market acceptance and growth.
Service Development System Characteristics (Shostack)
- Objective:
- Meaning: Based on factual and measurable data rather than personal opinions or assumptions.
- Importance: Ensures that decisions are grounded in reality and that the service meets actual market needs.
- Precise:
- Meaning: Specific and detailed, avoiding ambiguity.
- Importance: Provides clear guidelines and expectations, reducing confusion during development.
- Fact-Driven:
- Meaning: Decisions are made based on concrete evidence rather than speculation.
- Importance: Minimizes risk and increases the likelihood of successful outcomes.
- Methodological:
- Meaning: Systematic and structured approach to service development.
- Importance: Ensures a thorough and consistent process, leading to better planning and execution.
Change in Customer Behavior and New Benefits
- High New Benefits, Few Behavior Changes:
- Definition: Services that offer significant improvements but do not require customers to change their behavior.
- Example: Google’s search engine provided powerful functionality without altering how users searched the Internet.
- Outcome: Easier for customers to adopt and integrate into their routines.
- High New Benefits, Large Behavior Changes:
- Definition: Services that offer substantial benefits but require significant changes in customer behavior.
- Example: Satellite radio, which required changes in how customers accessed radio content.
- Outcome: Can be challenging to implement but can lead to substantial customer value if successful.
- Low New Benefits, Few Behavior Changes:
- Definition: Services that offer minimal new benefits and do not require behavioral changes.
- Example: McDonald’s offering a vegetarian menu.
- Outcome: Easier to implement and may attract a niche customer segment.
- Low New Benefits, Large Behavior Changes:
- Definition: Services that offer minimal new benefits and require significant changes in customer behavior.
- Example: DVORAK keyboard, which offered little new benefit compared to existing keyboards but required significant behavior change.
- Outcome: Often leads to poor adoption and potential failure.
Stages in New Service Development
- Business Strategy Review:
- Objective: Align new service development with the company’s overall vision, mission, and strategic goals.
- Components:
- Value Disciplines: Operational excellence, product leadership, or customer intimacy.
- Generic Strategies: Cost leadership, differentiation, or focus.
- Developing New Service Strategy:
- Objective: Define the strategic approach for growth and service development.
- Strategies:
- Intensive Growth: Increase market share, develop new services in existing markets, or enter new markets.
- Integrative Growth: Form alliances, joint ventures, or acquisitions to complement services.
- Diversification: Enter new markets with new services, which is riskier but necessary for long-term growth.
- Idea Generation:
- Objective: Generate and collect ideas for new services.
- Methods: Brainstorming, focus groups, customer observations, competitor analysis, and employee suggestions.
- Screening: Evaluate ideas for alignment with strategy and feasibility.
- Service Concept Development:
- Objective: Develop a detailed description of the service, including value, form, function, and customer experience.
- Process: Involve customers, employees, and other stakeholders in developing and testing the concept. Use a service blueprint to map the process.
- Developing the Business Case:
- Objective: Assess profitability and feasibility.
- Components: Ensure the service can be delivered effectively, meets customer needs, and generates a satisfactory return on investment.
- Service Development and Testing:
- Objective: Develop and test the service prototype.
- Process: Implement the service in a controlled environment, gather feedback from customers, and make necessary adjustments.
- Market Testing:
- Objective: Conduct pilot tests of the service and marketing mix elements.
- Process: Offer the service to a limited audience, gather feedback, and refine the service based on responses.
- Commercialization:
- Objective: Roll out the service to the broader market.
- Process: Launch in phases, starting with less risky markets, and monitor performance. Engage employees and gather customer feedback for continuous improvement.
- Post-Launch Evaluation:
- Objective: Assess service performance and make adjustments.
- Process: Review performance against goals, adapt to changes in the market, and implement improvements based on ongoing feedback.
Summary
The new service development process involves a structured approach from strategy formulation to market introduction and evaluation. Each stage is critical for ensuring that the service meets customer needs, aligns with business objectives, and achieves market success.