CONTRASTACIÓN DE HIPÓTESIS 1. HIPÓTESIS ESPECIFICA 1

M a n y o f t h e benefits o f b l u e p r i n t i n g c o m e from t h e actual n a t u r e o f t h e w o r k r e q u i r e d to create t h e charts—especially if employees themselves are directly involved in the task. Participation in m a p p i n g specific processes gives employees a clearer picture of their roles and responsibilities and makes t h e m feel like part of a team that is responsible for i m p l e m e n t i n g a shared service vision. Blueprints can also help managers and employees understand the service delivery process as customers experience it.

Blueprinting can also be used to show backstage personnel h o w their work relates to that of their front-stage colleagues. Backstage personnel provide a series of internal services (represented by each of the vertically stacked boxes in Figure 7.4) that support

C H A P T E R S E V E N • T H E S E R V I C E P R O D U C T 163

front-stage activities. If they do their jobs poorly, the employees working backstage may create problems for their coworkers with c u s t o m e r - c o n t a c t responsibilities. It's n o t always possible to give either external or internal customers exactly the service that they would like, but blueprinting can be a valuable tool for facilitating discussion about how to improve service processes.

F I G U R E 7.5

Flowcharts for Meal Delivery Scenarios

Conclusion

In mature industries, the core service can b e c o m e a commodity. T h e search for compet- itive advantage often centers on improvements to the supplementary services that sur- round this core. In this chapter, we grouped supplementary services into eight cate- gories, circling the core like the petals of a flower. T h e y are categorized as either facilitating or enhancing supplementary services. Facilitating supplementary services aid in the use of the core product or are required for service delivery, while enhancing sup- plementary services add extra value for customers.

Designing the overall service experience is a complex task that requires an u n d e r - standing of h o w the core and s u p p l e m e n t a r y services should be c o m b i n e d and sequenced to create a p r o d u c t offering that meets t h e needs of target customers. Blueprinting is a structured procedure for analyzing existing services and planning new ones. In particular, it enables us to define the different components of the aug- mented service, to examine the sequence in w h i c h they are delivered, and to identify potential fail points. We also gain insights into what is happening to the customer at each stage. Supporting each front-stage action are backstage activities involving people, supporting equipment and facilities, and information (often stored in a databank). As we discussed, a poorly organized backstage can lead to failures that are experienced by the customer.

Study Questions and Exercises

1. Define w h a t is meant by the core product and supplementary services. C a n they be applied to goods as well as services? Explain your answer.

2. W h a t service failures have you encountered recently? D i d they involve the core product or supplementary service elements? Identify possible causes and suggest h o w such failures might be prevented in the future.

3. Explain the distinction b e t w e e n enhancing and facilitating supplementary services. Give several examples of each for services that you have used recently.

4. R e v i e w the blueprint of the restaurant experience in this chapter (Figure 7.4). Identify and categorize each of the supplementary services described in the figure.

5. Prepare detailed blueprints for the following services: a. R e p a i r of a damaged bicycle

b. Applying to college or graduate school c. R e n t i n g a car

6. Describe the different types of information that service blueprints can provide.

Endnotes

1. Thomas Brinckwirth and Stephen A. Butscher,"Germany's Most Popular Radio Station Creates Loyal Listeners," Colloquy (the Frequency Marketing, Inc. quarterly newsletter) 6, no. 3 (1998); SWF3 Web site, www.swO.de,January 2001.

2. G. Lynn Shostack, "Breaking Free from Product Marketing," Journal of Marketing, 44 (April 1977): 73-80.

3. Pierre Eiglier and Eric Langeard,"Services as Systems: Marketing Implications," in P. Eiglier, E. Langeard, C. H. Lovelock, J.E.G. Bateson, and R. F. Young, Marketing Consumer

Services: New Insights (Cambridge, MA: Marketing Science Institute, 1977), 83-103. Note:

An earlier version of this article was published in French in Revue Francaise de Gestion, March-April, 1977,72-84.

4. The "Flower of Service" concept presented in this section was first introduced in Christopher H. Lovelock, "Cultivating the Flower of Service: New Ways of Looking at Core and Supplementary Services," in P. Eiglier and E. Langeard (eds.) Marketing,

Operations, and Human Resources: Insights into Services (Aix-en-Provence, France: IAE,

Universite d'Aix-Marseille III, 1992), 296-316.

5. James C.Anderson and James A. Narus, "Capturing the Value of Supplementary Services," Harvard Business Review, 73 Qanuary-February 1995): 75-83.

6. From James C.Anderson and James A. Narus, Business Market Management (Upper Saddle River, NJ: Prentice Hall, 1999), 180.

7. See G. Lynn Shostack,"Understanding Services through Blueprinting" i n T Schwartz et al., Advances in Services Marketing and Management (Greenwich, CT:JAI Press, 1992), 75-90.

8. G. Lynn Shostack, "Designing Services That Deliver," Harvard Business Review (January- February 1984): 133-139.

9. Jane Kingman-Brundage,"The ABCs of Service System Blueprinting," in M.J. Bitner and L. A. Crosby (eds.), Designing a Winning Service Strategy (Chicago, IL: American Marketing Association, 1989).

CHAPTER SEVEN • THE SERVICE PRODUCT 165 10. David Maister, now president of Maister Associates, coined the term OTSU while

teaching at Harvard Business School in the 1980s.

11. See for example, Eric J. Arnould and Linda L. Price, "River Magic: Extraordinary Experience and the Extended Service Encounter," Journal of Consumer Research 20 (June 1993): 24-25; Nick Johns and Phil Tyas, "Customer Perceptions of Service Operations: Gestalt, Incident or Mythology?" The Service Industries Journal 17 (July 1997): 474-488.

12. "How Marriott Makes a Great First Impression," The Service Edge 6 (May 1993): 5. 13. David E. Hansen and Peter J. Danaher, "Inconsistent Performance during the Service

Encounter: What's a Good Start Worth!" Journal of Service Research 1 (February 1999): 227-235.

"Name Your O w n Price"

w i t h Priceline.com

Priceline.com was launched in 1998 to give customers some leverage in purchasing a variety of services.1 Using the slogan, "Name Your Own Price," the Internet-based company invited price-conscious con- sumers to make offers for services such as airline tickets, hotel rooms, rental cars, long-distance phone service, and mortgages. In addition to helping customers save money, Priceline offered sellers an opportunity to generate incremental revenue without disrupting their existing dis- tribution channels or retail pricing structures.

Priceline termed its approach a demand collection system. Through its Web site, the firm collected consumer demand (in the form of individual bids guaranteed by a credit card) for a particular service at prices set by those customers. It then communicated that demand directly to participating sellers or to their private databases. Customers agreed to hold their offers open for a specified period of time, during which Priceline sought to fulfill their offers from inventory provided by participating sellers. Users of the service had to be flexible with regard to brands, sellers, and/or product features. Once fulfilled, purchases normally couldn't be canceled.

The concept of giving customers the freedom to set their own prices initially attracted a lot of attention and enthusiasm. The firm's market value rose to $20 billion within a month after it went public in 1999. Founder (and then-CEO) Jay Walker expanded Priceline's offer- ings to include hotel rooms, rental cars, home mortgages, long-dis- tance telephone services, and cars. He also added services like WebHouse Club that allowed customers to bid on groceries and gaso- line. Promoted heavily through television advertising featuring actor

William Shatner (best known for his role of Captain Kirk in Star Trek), Priceline soon became one of the most widely recognized brand names in e-commerce.

But in spite of Priceline's promising start, things began to go wrong in 2000. Instead of taking a markup on the inventory that it held and resold, Priceline sometimes found itself selling rooms, tick- ets, and even gasoline at prices below its own cost. There was a growing number of complaints, ranging from hidden airline charges to shabby hotel facilities; consumer dissatisfaction was compounded by poor customer service, eventually leading to an investigation by the attorney general in the company's home state of Connecticut and expulsion from the local Better Business Bureau. The company's business model had worked best in the air travel market, where Priceline accounted for about 4 percent of all ticket sales in the United States. However, new competition emerged in October 2000 when a number of airlines got together to create their own Internet service to dispose of unsold tickets at discounts of up to 40 percent. Named Hotwire, this service differed from Priceline in that users specified their travel needs (but no price) and received an almost immediate fare offer; however, as with Priceline, customers didn't learn the carrier name or precise schedule until after they had pur- chased the ticket.

WebHouse Club service had to be discontinued in late 2000 when it became clear that suppliers weren't eager to provide groceries or gasoline at cut-rate prices in response to consumer bids. And con- sumers themselves got frustrated at the conditions that sellers often

Pricing Strategies for Services

attached to sales, such as a requirement to sign up for trial magazine subscriptions.

In response to investigations into consumer complaints, the firm added more customer service reps, improved its training procedures, and instituted more consistent guidelines on problem resolution. Misleading procedures on the Web site were corrected. In particular, the full amount that customers would have to pay for an airline ticket, including all taxes and fuel charges, was disclosed on a single page; previously, the extras were noted on separate screens. Finally, an important phrasing change, from "Submitting my offer now" to "Buy my ticket now" clarified that customers were committing themselves to a purchase if their offer was accepted.

Seeking to sharpen its focus, Priceline announced that it was restructuring its operations, cutting staff, and canceling plans to add cell phone services and insurance. But Hotwire disclosed that it was expanding service to include hotel rooms and international air travel. Further bad news for Priceline came from the departure of key execu- tives and a plummeting stock price.

All in all, the future looked very uncertain for Priceline as it entered 2001, with promises of profits still unfulfilled and news that the company's market valuation on Wall Street had sunk to an all- time low of only $200 million—down more than 99 percent from its peak.

© Learning Objectives

After reading this chapter, you should be able to

£> explain how the differences between goods and services affect pricing strategy

£> appreciate ethical concerns in pricing policy

£)> identify the different outlays customers incur in purchasing and using a service

£> discuss the relationship between pricing and demand

^> understand yield management and how it relates to price elasticity

^ describe the key issues in designing