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New Service Development Process

Professors Zeithaml, Bitner, Gremler and Pandit, have published the stages of new service development from various
sources in their book entitled “Services Marketing” in 2008.

Stage 1: Business Strategy Review

At this stage we must review and understand the vision, mission, values and strategic orientation of our company. The
vision of transporting goods, i.e., cargo service would be different from the vision of transporting mail, i.e., courier
service. In 1997, Michael Treacy and Fred Wiersema have written about three value disciplines that companies must
choose from.
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(i) The operationally excellent firm, which is efficient and delivers services at the lowest cost to the customer,
(ii) The product/service leader, i.e., offering innovative services under a strong brand.    

(iii) The customer intimate firm, that excels in customer attention and customer service. Dr. APJ Abdul Kalam Technical University MBA
Notes (KMBN, KMB & RMB Series Notes)
Next, we must understand the strategic orientation that our company has decided to take to excel in the marketplace. A 8 Dec 2018
strategy is essentially a means to reaching business goals that our company has decided for itself. Generic strategies are 

game plans for operating and surviving in the marketplace. Michael Porter has written about three generic strategies in Guru Gobind Singh Indraprastha University
1980. (BBA) Notes
 9 Feb 2019
Stage 2: Developing New Service Strategy
Chaudhary Charan Singh University BBA Notes
We must decide the strategy that our company would like to take to grow in the marketplace and align new service (Old & New Syllabus)
development in that direction. These include  31 Aug 2019

(i) Intensive growth GGSIPU (MS113) Legal Aspects of Business

 7 May 2018
(ii) Integrative growth
Difference between Memorandum and Articles
(iii) Diversification of Association, Prospectus
 5 Dec 2018

For intensive growth, the company would strive to increase market share for its current services in the current market or
develop and launch new services in existing markets or take current services to new markets. These strategies are
depicted in the matrix . A company can increase its market share by changing the style of operations and enhancing its
customer intimacy, for instance. Ordinarily, service businesses choose to grow by taking their current services to new Vakantiepark aanbiedingen
markets, i.e., new countries and cities and adapt the offering to the preferences of the customers in the new market. You
may have noticed how McDonald’s opened its outlets in various cities in India, one after another. On the other hand, post
offices in India started providing fixed deposit services and passport related services in the same markets where they Bungalowparkoverzicht.nl

were offering postal services. Similarly, a customs agent may launch courier services in the city where they are located, as
an example of growing their business by offering new services in existing markets.

Stage 3: Idea Generation

The third stage of new service development is that of idea generation. This stage requires a formal department to be set
up in our company. The activities in this stage would include conducting idea generation exercises like brainstorming and
focus group discussion with customers, observing customers in different situations wherein they receive the same
benefit through similar or ernative services and learning about the services provided by competitors. The company must
also place suggestion boxes and institute suggestion reward schemes to attract suggestions from their employees.
Listening to customers is the best way to receive ideas, not only for improvements in the current services offering, but
also for entirely new services. The idea must align with the new service strategy; otherwise the idea must be dropped or
shelved. It must also undergo preliminary evaluation regarding the potential market for the benefit that customers are
willing to receive from the service. We must keep in mind that the quantum of investments starts increasing rapidly from
this point onwards for developing each idea. Unless the idea has clear potential, it must be dropped, otherwise the
company will face further losses if the idea is allowed to be developed further and is dropped at a later stage due to lack of
feasibility.

Stage 4: Service Concept Development

An idea that appears feasible and profitable is taken up for development of the service concept. The service concept is the
description of the service in terms of the value it will provide customers, the form and function of the service, the type
and level of experience that customers are likely to receive from the service, and the outcome of the service. The concept
is developed by involving customers, service personnel, service managers, suppliers and other professionals such that it
is acceptable to all and everybody agree that it is likely to provide much needed benefits to the customers. The service
concept is tested with customers and employees and is dropped if it is not found to offer substantial benefits to
customers in comparison to existing alternate methods by which customers can satisfy their need.

Stage 5: Developing the Business Case

It is ensured that it will be possible to deliver the services in a manner acceptable to customers, the customers are willing
to purchase the service, and the service remains profitable with a three-year ROI/ROCE that is greater than the prevailing
bank interest rate. If the service does not seem to be profitable, it must be dropped without incurring any further cost in
developing the concept further. The profitable business case is then developed for approval of the management and
representatives of the shareholders and investors.

Stage 6: Service Development and Testing

Once the business case for the service has been approved, it is taken up for development of the actual service. The
blueprint of the services is further developed and the service prototype is tested with actual customers. For example, a
bank can test new ideas by reorganizing current branches for the test period and observing and collecting data from
actual customers about the benefits of the new idea. One bank found that installing TVs with CNN channel reduced the
perceived waiting time for the customers and then the same was taken up for implementation in big branches. In this way
all new concepts are tested and those ideas that do not provide substantial benefits to customers are promptly dropped.

Stage 7: Market Testing

Once the service prototypes have been tested, these are put together for a pilot test. Alternative marketing mix elements
or 7Ps options are tested at this stage. At first, the pilot service is offered to the employees of the organisation and their
feedback is collected. The service is then modified according to the feedback received and is offered to actual customers
for a short period and their feedback collected. The feedback is analysed for effecting further modifications in the service
and tying up any loose ends. If the service passes the market testing phase and it is found that customers are enthusiastic
about the new service and the service is estimated to generate profits, the service development is taken to the next stage.

Stage 8: Commercialisation

The plan for rolling out the new service is then drawn up. It is usually rolled out in a phased manner by opening it up in the
least risky markets and then quickly spreading it to other markets if the feedback is favourable. Commercialisation has
two important objectives. The first objective is to elicit the support of the large number of service personnel who are
going to deliver the services. At this stage the new service is marketed to the employees of the organisation as a new
smart offering that generates profits and bonuses for the organisation. The second objective is to monitor the service
throughout the period that customers purchase and use the service. Every interaction at the moment of truth and every
detail is monitored and feedback collected from the customers as to whether the latter’s needs are being fulfilled,
whether they are deriving benefits from the service and are satisfied and what modifications they would like to be made
in the service. The service is constantly modified based on the feedback collected. Customers’ comfort with the price and
other marketing mix elements is thoroughly ensured by the service manager and adjustment and improvements are
continuously made so that customers feel a compelling need to purchase the service.

Stage 9: Post-launch evaluation

The service is reviewed for performance according to a pre-planned period of review. Customers, employees, the market
and the context keep changing with time. It is important to effect necessary changes periodically in the service in line
with the changes in the above dimensions. The service blueprint comes in handy at this stage. It is also inspected for
alternate ways to gain further efficiency and pass on part of the benefits so accrued to the customers and part of the same
to the organisation. Customers and employees are requested for new ideas for this new service and same are incorporated
to be able to provide the latest to the customers and to remain ahead of competitors in the marketplace.

New Service Characteristics

Since services are intangible, it has to have 4 basic characteristics:

1. It must be objective, not subjective
2. It must be precise, not vague.
3. It must be fact driven, not opinion driven.
4. It must be methodological, not philosophical.
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