Despite its pervasive use in today ’s business lexicon, the term new service is often misunderstood. What exactly constitutes a new service?
What is unique about a service com- pared to a product? What is the relationship between services and products? Since the answers to these questions remain unclear to much of the business world, the majority of service development efforts are misfo- cused and ineffi cient. Understanding what differentiates services and makes
them unique is the fi rst step in enhancing new service development.
Four unique-to-service qualities can help to defi ne the word service . These are summed up in the four “I ’s”:
1. Individualized experiences: Services are consumed differently by different customers.
2. Intangible value: The core aspect of a service is not a physical hard good, but the intrinsic value customers receive and the memories they retain.
3. Instantaneous evaluations: Customers ’ reaction to and assessment of the service is immediate.
4. Inseparable components: Services should be thought of as the holistic sum of their individual parts.
The lack of understand- ing surrounding the word services leads to misfocused and ineffi cient new service efforts.
Winning companies intimately understand the four I ’s of service development and incorporate them into every facet of their offerings. For each of the four I ’s discussed in the following sections, let ’s take a look at innovative companies that have consciously addressed these unique aspects of service development.
3.2.1 Individualized Experiences
The most glaring difference between services and products is that every customer consumes a service differently than every other customer. Service is all about the memory that is created in the mind of the customer. Because service delivery is inevitably subject to variation and customers all have dif- ferent perceptions, the exact service delivery and consumption interplay will rarely ever be replicated the same way twice. Providing services means doing something for someone else, not producing a product for mass con- sumption. This is one of the most critical elements of any successful service:
the extent to which the provider can deliver a unique, customized experi- ence to each customer rather then apply a generic one-size-fi ts-all solution.
With nearly 8,000 stores, Walgreens drugstores serve patients who speak a variety of languages. In pharmacies, it can sometimes be extremely diffi cult to explain to nonnative English-speaking patients how to take their medication properly. For patients to follow instructions when English is not their primary spoken language can be diffi cult. To solve this prob- lem, Walgreens launched a new service called Multilingual Prescription Labels in 2002. Using this service, customers could now get their prescrip- tions in their preferred language. The new service reduced errors and increased overall customer satisfaction with Walgreens.
But Walgreens did not stop there. To further individualize its offer- ings, the company launched a complimentary Dial-A-Pharmacist service that enables quick access to a pharmacist who speaks the customer ’s language. Walgreens created a database of the languages that their phar- macists speak, enabling a patient to connect to any pharmacist on duty who speaks the desired language via in-store phones. Today, the prescrip- tion labels have expanded to cover 17 languages, and over 1,000 calls are received per month for Dial-A-Pharmacist.
3.2.2 Intangible Value
It is important to underscore that services are not hard goods, but rather intangible interactions or experiences. Consider, for example, legal advice from corporate counsel, software customization and installation
services from an information technology (IT) fi rm, or a consultation at the doctor ’s offi ce . While all of these services leave the customer with something of value, the service—or value—they get is certainly nothing concrete that they can pull out of their pockets and show to their friends.
This unique aspect of services opens the door for both opportuni- ties and challenges in development. Because there is nothing tangible for customers to evaluate beyond memories or receipts, the experience itself is what is digested and reevaluated down the line. The key point—
experience—is the essence of successful new service development. For this reason, services need to make a lasting positive impression, satisfy customers ’ expectations, and be responsive to customer feedback in order to assure continued success.
Netfl ix was founded in 1997, and a decade later this new entrant had taken over the industry, literally pushing the incumbent giant Blockbuster into bankruptcy. Netfl ix gave customers the same physical product that Blockbuster did—DVDs—but by recognizing the intangible nature of the service, Netfl ix provided customers with a signifi cantly superior experi- ence. Besides eliminating late fees, Netfl ix made sure that its service pro- vided a great customer experience through an easy-to-navigate website, queue management, and quick and convenient mailing processes. With its remarkably smooth and responsive service, Netfl ix kept customer satis- faction at industry-leading highs. In its early days, Netfl ix had 100 phone representatives for its 115,000 customers. But by the time its customer base had grown to 3.5 million users, errors had been reduced so much that the company only needed 43 representatives.
3.2.3 Instantaneous Evaluations
Another defi ning feature of services is the immediate and ongoing nature of the experience. Customer evaluation is not limited to the moment of the service delivery, but starts with the initial communication and often continues even after the service has been completed. This has signifi cant consequences for how expansively developers should think about new ser- vice experiences and the different touch points the service covers.
At every contact between a customer and a company, new opinions and expectations are formed. Service providers have the advantage of being able to assess these evaluations and make actionable decisions based on this feedback much more quickly than product developers. It is impera- tive to capture these feelings and opinions as they happen to most effec- tively tailor services and make revisions accordingly. Of course, developers
should be careful not to react prematurely to a few outliers ’ reactions;
customer feedback should be thoroughly studied to identify the reactions that are relevant to the entire customer base before making modifi cations.
When a customer orders a pizza, is he or she paying for the pizza or the convenience? Probably both. Domino ’s Pizza, America ’s largest pizza delivery chain, recognizes this. In 2009 the company launched a massive self-improvement campaign—with special focus on service and total cus- tomer experience.
Its new offerings started with a special “pizza tracker” service. Custom- ers could now conveniently order their pizza from a computer and track it as the pizza went through the stages of (1) order placement, (2) prepara- tion, (3) baking, (4) boxing, and (5) delivery. Customers were also invited to rate their experience and post reviews online. Recently, in a major step toward transparency, the company started publicly sharing these com- ments—including negative ones—by posting unvarnished comments on a large Times Square, New York, billboard.
Other components of Domino ’s campaign included “Show us your pizza,” wherein Domino ’s asked customers to share photos of actual deliv- ered pizzas on its website. Some of these images were also used in a self- fl ogging ad campaign in which company executives publicly apologized to customers, with the promise to improve their service. Internally, these customer reviews were used as stimuli in a large-scale effort to reinvent the company ’s entire value chain to make sure that customers receive great experiences. Listening to customers seems to have worked; Domino ’s experienced a historic 14.3 percent quarterly gain in 2010.
3.2.4 Inseparable Components
Inseparable components underscores the fact that services are the collective sum of their individual touch points, spanning multiple contacts with the customer. When a service is performed, the holistic memory and perception is retained as one rather than separate experiences in the service chain. For example, the overall experience when fl ying on an airplane encompasses the ticket purchase online or over the phone, the check-in process, the fl ight itself, and the luggage retrieval. If there is a disconnect in service quality at one of the contact points—or even at subsequent ones—the whole service experience is negatively affected. For instance, if a customer ’s luggage is lost after he arrives at his destination, the entire service experience is ruined. Ser- vice development therefore needs to address the holistic aspect of services and the interplay between their numerous customer contact segments.
The inseparable nature of services is especially evident in ones that accompany products. On the surface, Amazon ’s Kindle seems like any other ebook reader; but then, why has Kindle been so successful while other ebooks have failed? The answer lies in Amazon ’s recognition of the importance of the inseparable components that make up the entire experience—which is about the service rather than the physical product.
The Kindle store has the largest collection of ebooks in the market, making it easy for customers to get all their books in one place. Besides accessing their purchases on Kindle, customers can read them on their computer and other portable devices as well. The software is extremely easy to use and includes automatic wireless syncing. All these components seam- lessly combine to give customers a hassle-free experience that has over- turned the industry. Today Amazon sells more digital books than physical ones and continues to expand its product line.
Recently, many companies that have traditionally been fueled by the high quality of their products have been emphasizing ancillary services to competitively differentiate their products. Over the last few years, Lexus has shifted its business model to emphasize the service aspect of its deal- erships. While the Lexus brand still stands for luxury, the company has successfully expanded it to include high-quality, reliable, and exceptional service as well. Now the Lexus brand stands for a luxurious experience, not just a luxury car. Other automobile companies, such as BMW, followed suit and began offering free lifetime maintenance for their high-end vehicles as well. Again, the service is offered as a complement to the product to help bolster the overall company message and the experience realized.