New Service Development Process

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New Service Development Process

Professors Zeithaml, Bitner, Gremler, and Pandit outline the stages of new service development in their book "Services Marketing" (2008). Here's an in-depth yet concise explanation of each stage:

Stage 1: Business Strategy Review

  • Objective: Understand the company’s vision, mission, values, and strategic orientation.
  • Value Disciplines (Treacy & Wiersema, 1997):
    • Operational Excellence: Efficient service delivery at the lowest cost.
    • Product/Service Leadership: Offering innovative services with a strong brand.
    • Customer Intimacy: Excelling in customer service and attention.
  • Strategic Orientation: Determine the strategy (Michael Porter, 1980) to excel in the marketplace.

Stage 2: Developing New Service Strategy

  • Objective: Align new service development with the company’s growth strategy.
  • Growth Strategies:
    • Intensive Growth: Increase market share, develop new services in existing markets, or enter new markets with existing services.
    • Integrative Growth: Expand through vertical or horizontal integration.
    • Diversification: Offer new services in new markets.

Stage 3: Idea Generation

  • Objective: Generate new service ideas.
  • Activities:
    • Brainstorming and focus groups with customers.
    • Observing customers and analyzing competitor services.
    • Collecting employee suggestions through suggestion boxes and reward schemes.
  • Evaluation: Align ideas with service strategy and conduct preliminary market feasibility assessment.

Stage 4: Service Concept Development

  • Objective: Develop and describe the service concept.
  • Activities:
    • Define the service’s value, form, function, customer experience, and outcomes.
    • Involve customers, employees, suppliers, and professionals.
    • Test the concept and drop it if it doesn’t offer substantial benefits.

Stage 5: Developing the Business Case

  • Objective: Ensure the service is deliverable, profitable, and acceptable to customers.
  • Activities:
    • Assess feasibility, customer willingness to purchase, and profitability.
    • Develop a business case with a three-year ROI/ROCE exceeding bank interest rates.
    • Seek management and shareholder approval.

Stage 6: Service Development and Testing

  • Objective: Develop and test the actual service.
  • Activities:
    • Create a service blueprint and prototype.
    • Test prototypes with actual customers and collect data on benefits.
    • Drop ideas that do not provide substantial benefits.

Stage 7: Market Testing

  • Objective: Pilot test the service.
  • Activities:
    • Test alternative marketing mix elements (7Ps).
    • Conduct pilot tests with employees and then actual customers.
    • Collect and analyze feedback for further modifications.

Stage 8: Commercialisation

  • Objective: Roll out the new service.
  • Activities:
    • Launch in least risky markets first, then expand.
    • Market the service to employees and gather their support.
    • Monitor customer interactions and continuously collect feedback.
    • Adjust the service based on feedback to ensure customer satisfaction.

Stage 9: Post-launch Evaluation

  • Objective: Review service performance and make necessary adjustments.
  • Activities:
    • Periodically review the service blueprint for efficiency improvements.
    • Incorporate new ideas from customers and employees.
    • Ensure the service remains competitive and aligned with changing market conditions.

New Service Characteristics

For effective service development, services must exhibit these characteristics:

  • Objective: Focus on measurable outcomes.
  • Precise: Clear and specific descriptions and expectations.
  • Fact-driven: Based on data and evidence, not opinions.
  • Methodological: Systematic and structured approach to development and evaluation.

This comprehensive yet concise breakdown helps ensure a thorough understanding of each stage in the new service development process, leading to successful and profitable service offerings.