35 Service Innovation and Design

Dr. Puja Waalia Mann

 

1.0 Introduction

 

In October 2014, Indian consumers woke up to a whole new definition of the term shopping with the online retailers like Amazon, Flipkart and Snapdeal offering attractive and unique shopping experiences online which the Indian consumers had not heard of. The prices were slashed beyond expectations, returns were made easy with swift cask backs and the product delivery was promised overnight. This level of service was unheard of till then. In fact many of the innovative benefits offered were hindrances in doing online shopping. On 6 October 2014, both Flipkart and snapdeal touched a mind boggling figure of Rs. 600 crore sale in a day, which was a record of its kind. The point to ponder is that how did such a major mind shift happened overnight for the Indian consumers. Flipkart had been in business since 2007, what led to a revolutionary change in the perception of its target consumers. The answer is direct and simple- an innovative service design from these online players which clicked immediately with the consumers.

 

1.1 Learning objectives

 

In this module you will learn:

 

a)      Meaning of Service innovation

b)      Features of Service Innovation and design

c)      Benefits of Service innovation

d)      Hindrances in developing and designing Service innovation

e)      Examples of successful Service Innovations

 

Keywords: Service Innovation, Service design

 

1.2 Service Innovation:

 

It was in the year 1993 that the idea of Service innovation was first developed by Miles. Over the span of two decades, this concept has undergone a lot of development. Service marketers keep themselves busy in evaluating what new and unique service may be offered to the consumers to satisfy their unfulfilled need through the services they are dealing in. These services may either be completely new for a consumer segment or a new feature may be only promoted well; the purpose is to let the consumer perceive the service feature or design as being new for him. In the examples of online retailers in India, as discussed above, the retailers did not offer any new feature. Rather, they designed their service offering in such an innovative way, to address the reasons blocking the Indian consumers from making a purchase online especially for products like clothes, shoes and electronic gadgets. Hence, we may conclude that Service innovation refers to a new or a unique service consumption experience offered to the consumer by a service marketer to gain a competitive edge in the market.

 

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1.      What is the meaning of Service Innovation? Is it the same for all services?

2.      Service Innovation and Service Quality refer to the same concept of Quality. Comment.

3.      With the help of a suitable example, explain the concept of Service Innovation in online retail.

 

1.3 Elements of Service Innovation and Design

 

There could be various parameters which could be available for a service marketer to design a unique service delivery experience for the consumers. The marketer may use one or more than one feature in combination to offer an innovative design of its service. Let us discuss the features available at the disposal of the service marketer to design and offer an innovation:

 

a) Product- In the context of Service marketing, product refers to the bundle of benefits being offered to the consumer on the purchase of a service. A service marketer may design his core benefit in a unique way that a consumer feels is different. For a Restaurant, tasty and hygienic food is the core reason for visiting by an individual or a group of consumers. A chain of Rajasthani cuisine restaurant- Chokhi Dhani– is a successful example of offering a innovative menu to its consumers – only Rajasthani dishes cooked in typical Rajasthani style. The food at Chokhi Dhani is a unique combination of a number of dishes but only Rajasthani. Hence it is the product which is being designed in a unique way for the consumers.

 

There could be technological aspects in a service which may be improved for offering. For instance, In Indian telecom market, Bharti Airtel was the first player to offer and promote the 4G internet service. This was an innovative service product offered by the telecom major. Thus, the innovation in service may refer to either a new service or an improved service.

 

b) Physical Evidence– Continuing with the same example of Chokhi Dhani, the interiors of the restaurant, the ambience, the dresses of the service personnel, the seating arrangement, etc . all are designed with the reflection of Rajasthan culture blended with ease of delivery. For example, there are traditional lamp posts in the open area but they have CFL light the lamps. The seating arrangement is done on floor with comfortably designed seats but the hall is air conditioned. Hence, physical evidence of a service could be designed in an innovative manner to offer a unique service experience to a consumer.

 

c) Service creation and Service delivery– The Burberry stores, leading fashion stores of the west, offer a very innovative way of letting the consumers choose the product and get it delivered at their place of preference. Burberry offers latest dresses and designs to its walk-in customers in the store on a huge screen. The consumer can stand in front of the screen and view himself or herself in any of the selected dress with the flexibility of customization of some features of the dress. Having chosen the final shape and design of the dress, the consumer can get the dress couriered to the preferred place within a few days. Thus innovative can be thought of in service creation and delivery.

 

d) Service Personnel Interaction- An innovative experience of a service could be the mannerism and behavior of the service personnel. This could be the result of a well researched and deliberately trained Personnel interaction. For example, in an amusement park, one may find some employees dressed up as different characters and may also behave like one. Visiting a high end premium hotel, the consumer may be given a choice of menu in different venues. Not only the food but also the costumes and mannerism of the service employees would vary with the choice of menu.

 

e) Service processing time- In this fast world, time seems to be the most precious thing. You can hear almost every other person complaining that they have no time. A service marketer can attempt to reduce the time for service creation and delivery and offer an innovation to the consumers by saving their time. Lakme salons in India have come up with premium express services in hair colour, facial, manicure and pedicure which take not more than ten to fifteen minutes as compared to more than thirty minutes in addition to the waiting time. The consumer can get an appointment and avail of these beauty services in less than half the time by shelling out some extra bugs. This is a way of offering an innovative time saving service to the time-strapped buyers.

 

f) SERVUCTION- This refers to the interaction between the Service Supplier and the user. Innovation can be thought of in the interaction between the two parties. This could mean a coproduction of service.

 

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4.   With the help of a suitable example, discuss an innovative service observed by you in:

 

i) Grocery marketing

ii) Travel and tourism

iii) Banking

iv) Telecom

v) Satellite TV channels

vi) Water purifiers

vii) Insurance

viii) Hospitality

ix) Beauty Services

x) Car repair and Service

 

 

1.4 Benefits of Service Innovation

 

Offering a unique service feature is very much desirable by the service organization. A Unique Selling Preposition (USP) if designed and delivered effectively can lead to a number of benefits for the organization. Let us discuss some of the benefits of Service Innovation :

 

a) Strong Positioning– A service organization which is able to develop and offer an innovative service feature gains the benefit of creating a strong positioning for its Brand in the minds of the target consumers. This positioning is based on the Service innovation. For instance, Amazon, in India, has developed an enviable service innovation of easy returns of the merchandise and a payment credit within 48 hours of the return. This service feature is so effectively promoted and implemented that the Indian consumer typically, believes that only Amazon is truly able to offer the return and refund service amongst the various online retailers.

 

b) Competitive edge– A well thought out and innovative service design gives a service firm an edge over the competitors in the market. The service firm is known by the unique service experience it offers to the consumers.

 

c) Wider consumer base– A well thought of and designed innovative service may appeal to a broader set of consumers thereby facilitating to increase the reach of the service marketer. In the above example of Amazon, the easy return service feature may click well with the otherwise apprehensive consumers who may like to try to buy a product online, feeling assured that the same may be returned if they are not satisfied.

 

d) Increased Sale Volumes– An innovative service design is able to fetch larger sales volume by virtue of its unique features being marketed. However, it is important to note that innovative service feature should also be perceived to be useful for the consumer, only then it may be effective.

 

e) Improved Profitability- A higher consumer base may result in increased sales thereby leading to improved profitability of the service firm.

 

1.5 Hindrances in developing and designing Service innovation

 

In the able sections, we have discussed how a service firm can gain from the benefits accrued from having an innovative service design. However, designing an innovative service is not a magic wand with its financial gains. If it was so, every service marketer would aim to develop an innovative service. In the following sections, we shall discuss about the various obstacles in the way of designing an Innovative service:

 

a) Lack of creative ideas– One of the most important drawbacks in designing any service feature is the lack of creative ideas to be offered to the consumers. There are not very many innovative features to be offered and hence not much differentiation is seen in the service market offerings. The marketer plans almost similar service features as that of the competitors and hence the consumer does not perceive any fundamental difference or uniqueness in most of the promotional offers or service designs.

 

b) High Cost– Developing some new feature may entail the cost of research which may be high enough to be afforded by most of the firms. Further, in an attempt to do something innovative for the consumers, itself may cost a service provider. Hence to offer an innovative service design, the service marketer may have to spend a good amount of money.

 

c) Time consuming– The time required to discuss, plan, develop, design and implement an innovation may be a very lengthy process. Moreover, in this competitive world, the time taken for such an exercise may go waste, if any competitor is able to copy the service innovation and presents it to the consumers beforehand.

 

d) May not be perceived positive by consumers– While designing and offering an innovative service feature to the market may be a lengthy and well thought out process from the service provider’s end. Yet it may not be perceived as positively by the target consumers as expected. The marketer may not be able to gauge the real need of the consumers and the innovation may not be able to be perceived as valuable for the consumers.

 

 

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5. Mention any two benefits which a service provider can accrue if he offers some innovation.

 

6. Do you agree that Offering Innovative Service is an expensive exercise? Why/ Why not?

 

7. Citing an example from your routine life, mention some innovative service witnessed by you. In your opinion, will it have a positive or a negative impact on the sales?

 

8. Describe two precautions to be taken while offering any Service Innovation.

 

1.6 Examples of successful Service Innovations

 

Offering convenience to the consumers in the process of ordering, creating and availing of a service is one of the easiest goals to be achieved via Service innovations. This goal can also effectively attract consumer trials and ensure a regular purchase. In this section, let us discuss some of the successful service innovations:

 

a) Service Innovation in Banking Sector– One of the first sectors to get the taste of the Intranet and Internet in India, as in the world, was the banking sector. Starting with the Internet banking facilities, the service innovations in this sector have not come to a pause yet. Be it the transferring of money, checking the cash balance, requesting a cheque book or even opening a Bank account, all the facilities are available over the Internet. The convenience to the account holder was extended to Mobile banking or tab banking with ICICI leading the innovations. Introduction of

 

ATM’s in India by HSBC in 1987 was another revolutionary innovation of making it convenient for an account holder to withdraw cash at anytime from a number of kiosks stationed near to the consumer. It was further facilitated by the spread of use of Debit card and Credit card by which innovative banking services were offered to the Indian account holder.

 

b) Service innovation in transportation- Availing of public service transport, like Taxi, meant reaching a public transport booth or stand, negotiating a price or rate of travel and then hiring it.

 

For a bus, even for a luxury bus, the same process had to be repeated. Uber, offering services in India since July 2014, is an example of app-based taxi hiring service which provides the benefit of convenience and time to the traveler by hiring a taxi from his mobile phone at a negotiable price and boarding the taxi from the place of his choice. In addition it also offers a choice of pooling in the service for a common route, thereby saving the cost of fare.

 

c) Service Innovation in Healthcare- Gone are the days of visiting a crowded local pathology laboratory to get some medical tests done, empty-stomach, and having to wait for long for your turn to come. Then another round after few hours to collect the reports of the sample. Service innovation in this field has resulted in many Path labs offering a service of getting the samples collected from home and delivering the reports also at home or sending it through mail to the clients. This service is being offered to the consumers without any extra charges. It saves the consumers the effort and time of going to a lab twice and having to wait for the turn to come. The examples are SRL path labs and Dr. Lal’s Path Labs to name a few .

 

There are few new online retailers , like Merapharmacy, Netmeds, etc., medicines and offering a service of delivering monthly quota of medicines to the patients home to facilitate the elderly who might find it difficult to move out for buying the same.

 

d) Service Innovation in retail- One of the sectors witnessing most of service innovations, in India, currently, is the organized retail sector. Be it the shopping of accessories, electronics, fashion wear, furniture or groceries, buying online has made it very convenient to the consumer. With the comfort of one’s own surrounding and time, the orders can be placed by comparing a large number of Brands and have the products delivered at home. In addition to the easy shopping and delivery the online retailers are increasingly trying to attract the Indian consumer by offering so many service innovations like Cash backs, easy returns, faster Product delivery, safe financial transaction, gift packages etc.

 

e) Service innovation in entertainment- The field of entertainment industry is very vast, encompassing, amusement parks, theme parks, multiplexes, water parks, fun destinations etc. Innovations to attract a consumer and offer him a pleasant experience and stay is an objective aspired by almost all the service firms in the industry. These innovations may range from offering price discounts during off peak days or hours, giving complimentary services within the package, letting the hotel or resort consumer enjoy the experience of self cooking in a well furnished kitchen, offering complimentary local rides, site seeing , adventure games, etc.

 

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9. Describe a service Innovation in each of the following Service industries:

 

i) Banking

ii) Entertainment

iii) Restaurant

iv) Hotel

v) Retail

 

1.7 Conclusion

 

To conclude, it may be said that Service Innovation is an attempt by the service marketer to offer something different and attractive to the service consumer with the aim to delight him. While the core benefit being offered in the service should not be diluted or compromised with, value addition in a creative form can increase the consumer base of a service firm leading to higher profitability. With the advent of revolutionary improvements in technology , especially with the coming of Internet, service marketers have been able to offer a variety of service innovations like the Automatic Teller

 

Machines (ATM), Debit cards and Credit cards by the Banks; Mobile app based shopping by various retailers; Ticket sale by multiplexes, railways, Airways and other public transport; On demand house hold services like car cleaning, Electric repair, plumber and carpenter services to name just a few. None of the service sectors has remained aloof of the service innovations today. All the more due to the hectic lifestyles of the average Indian consumer, new services like depositing the various household bills and children’s fees are also flourishing in the metro areas where the double income nuclear families find it difficult to take out time for such work. It is important for service provider to ensure that the innovations offered should aim to enhance the quality service experience of the consumer. Service innovations can be done at various components of the services like at the core benefit level, service ordering level, service creation and delivery level, service process, physical evidence, service personnel or at the service consumption level. This experience can be made pleasant by making the service ordering and consumption convenient or saving the time of the service production and delivery.

 

1.8 Summary

 

Service Innovation, in simple terms, refers to the creative, unique and a new way of offering a service to the target consumer. Newness can mean some new feature of the service or an improved feature or process of service delivery. Sometimes, Innovation can also refer to a service design perceived to be new for a market segment. Whenever a new feature of a service design is offered to a consumer, there is a tendency to try it. An attractive and a useful innovation can increase the consumer base and therefore, result in higher sales and profitability of the service firm. However, it is important to note that not all innovations may lead to a successful acceptance by the consumers. Further, the cost of research and development of a service innovation may not be met by the expected profits after its introduction. Service marketer must be very cautious is trying to design an innovation and present it to the consumer. There are many examples of successful innovations in a number of sectors like Banking, Transport, Entertainment, Retail, etc.

 

Learn More:

  1. a) Den Hertog, P. (2000), Knowledge-intensive business services as co-producers of innovation, International Journal of Innovation Management
  2. b) Howells, J. and Tether, B. (2004) Innovation in Services – Issues at Stake and Trends. Studies in Innovation Matters related to the Implementation of the Community ‘Innovation and SMEs Programme’. ESRC Centre for Research on Innovation and Competition (CRIC). Brussels Luxembourg.
  3. c) Nijssen, E.J.; Hillebrand, B.; Vermeulen, P.; Kemp, R. (2006), “Exploring Product and Service Innovation Similarities and Differences”, International Journal of Research in Marketing ,23 (3): 241–251
  4. d) Park S.C and Chong L.L. (2009). Innovation Framework and Strategies: an APO perspective. ISBN: 92-833-7082-1