Mmagimtnh 1988, 3, No, 3.

29&-312

New Service Development

Donald W. Cowell

The topic of new service development has been relatively neglected in the literature on
innovation and new product development. This paper explores some of the similarities
and differences between new product development and new service development. Ii
outlines tke typical stages of the new product development process and then suggests how
new product developmeni in service organisations may differ because of tke
characteristics of services like iniangibility and inseparabiliiy.

INTRODUCTION

The British economy is now a service economy. That is, in terms of output
and employment, services have become the largest sector of the economy.
Corresponding with this service revolution, marketing scholars have begun
to study the subject of services marketing much more systematically and
rigorously.
The development and launch of new products has been an important
topic for marketing academics and marketing professionals for a number of
years. There is a significant volume of published literature on the subject
which reiiects the extensive research which has been undertaken and the
importance of the topic to practitioners. A number of potentially valuable
insights and experiences are available in this new product literature which
are applicable to developing and launching a new service. However it is
increasingly recognised that there are a number of issues which are
distinctive to services and that the area of new service development lias
been relatively neglected. For this reason the American Marketing
Association sponsored a symposium on developing new services in 1983 and
"new services development" has been designated as the top priority area by
the Marketing Science Institute in the USA. In the UK too, more attention
is being devoted to the differences between new product development land
new service development. The purpose of this paper is to focus on some of
the factors that should be considered when preparing for the launch of a
new service and to indicate some of tlie differences between new product
and new service development, (Cowell 1984).
296
 NEW SERVICE DEVELOPMENT 297
REASONS FOR DEVELOPING NEW SERVICES

There are a number of reasons why service organisations develop new

services. They include:

Obsolescence
Service organisations cannot continue to rely on their existing range of
services for their success. Sooner or later they become obsolete. They mature
and then decline in their product life cycle. Change is a way of life for the
innovative service organisation.

Competitioii
New services are required to maintain present sales success and customer
loyalty as well as to capitalise on changing marketplace needs in
competitive markets.

Spare capacity
New services may be introduced to use up spare capacity like vacant theatre
seats or low levels of usage at off peak times on transportation systems or in
hotel chains.

Seasonal e£fects
Many service organisations (e.g. in tourism) may have seasonal patterns of
demand. New services may be introduced to even out these fluctuations.

Risk reduction
New services may be introduced to balance an existing sales portfolio where
heavy dependence is placed on just a few services offered within a range.

Opportunities
New opportunities may emerge through a competitor withdrawing from a
market or market research revealing unmet customer needs.
Whatever the reasons for introducing new services they are usually
obtained in two ways. They may be obtained externally through acquisition
or through licensing (e.g. as in international marketing) or they may be
developed internally through the process of new service development. Our
concern in this paper is with the latter.
298 D. W. COWELL
SERVIG£/MAIIK£T STRATEGIES
An important influence upon a service organisation's new service
development and launch procedures and processes will be its service/market
strategy. Effective service line strategies are underpinned by a clear business
definition: clearly defined target markets to be served and prescribed
services to be offered to those target markets. The strategic options for
service organisations are similar to those available for organisations
marketing products. They are:
(a) Attempting to sell more existing services to existing clients.
(b) Attempting to sell existing services to new clients.
(c) Attempting to sell new services to existing clients.
(d) Attempting to sell new services in new markets.
The word '^new" can have a number of meanings attached to it in service
contexts. One view of product innovations which lends itself to service
settings identifies a number of groups of new services ranging from major
innovations to style changes (Lovelock 1984). They are:

Major innovations
Major innovations are new services for markets still largely undefined. They
include both new types of services (e.g. the first earphone system) as well as
new service delivery systems (e.g. distance education schemes).

Start up businesses
Start up businesses are new services for a market already served by services
meeting the same generic needs. Examples include private health care
services; the Abbey National Building Society cheque book account; and
new kinds of retail businesses like Tie Rack.

New services
New services for the currently served market are an attempt to offer existing
customers of the business a new service not available before but which may
be offered by a competitor. Examples include building societies extending
their services into fields like insurance and brokerage services.

Extensions
Service line extensions are additions to the existing service range and line.
They include restaurants adding new menu items or airlines enhancing their
services by adding a new route or special ticketing arrangements.
 NEW SERVICE DEVELOPMENT 299
Improvements
Service improvements involve a change to certain features of services
already on offer to an existing market. They include speedier execution of
an existing service like hotel reservation through automation, increasing leg
room on seats by an airline or extended opening hours by a bank.

Style changes
Style changes represent a highly visible series of changes. They include new
livery and design schemes for a transport company, refurbished interiors in
a chain of opticians or new uniforms for hotel and restaurant staff.
Opportunities in the marketplace are the impetus for new service
development and launch policies. However new the service may be, a
systematic process for new developments has its virtues as in product
marketing.

NEW SERVICE DEVELOPMENT

When developing and introducing new products it has been found that an
ordered and systematic process may help reduce the risk of product failure.
New product development procedures though vary considerably. Some may
be highly elaborate and formal, others may be more simple and informal.
Where they exist such processes tend to include a series of steps or phases
between the decision to look for new ideas and their ultimate
commercialisation in the marketplace. While the terminology of new
product development and the range and order of steps included in the
processes varies, the underlying notions behind their use does not. These are
to create as many good ideas as possible; and then to reduce the number of
ideas by careful screening and analysis to ensure that only those with the
best chances of success get into the marketplace. One common sequence is:

Idea generation
Idea screening
Concept development and testing
Business analysis
Development
Testing
Commercialisation
Not all the steps may be necessary for all services. Much will depend upon
factors like the characteristics of the particular target market, the nature of
the new service, competitive pressures, the time and resources which can be
devoted to the process and the degree of innovation involved.
300 D. W. COWELL
Idea generation
Ideas may be generated in many ways. They can arise inside the
organisation and outside it; they can result from formal search procedures
(e.g. marketing research) as well as informally; they may involve the
organisation in creating the means of delivering the new service product or
they may involve the organisation in obtaining rights to the service product,
like a franchise.
The creative process of developing new ideas has intrigued marketers
although the process itself still defies detailed understanding. This has led,
in some cases, to the adoption of techniques like "synectics" brainstorming
and lateral thinking to help improve the creative dimension of new service
development.
For most service companies generating new ideas is not a problem. Inside
the business the most common source of ideas will be the marketing
function. It has constant contact with competitors and with customers and
through sales reports and market research receives regular information on
changing customer and environmental requirements. According to
Easingwood (1986) Marketing and Market Research account for over 40
per cent of new product ideas in sampled service businesses, which is in
contrast to Operations (13.5 per cent) where because of the simultaneity of
production and consumption of services, "new" services may be seen as a
further burden on hard pressed operations staff. Outside of the business
agencies (e.g. advertising agencies), competitors, customers, overseas
markets and suppliers account for around 36 per cent of ideas.
Many ideas though are conservative. They often focus most on
geographical extensions, "me too" ideas or upon minor modifications to the
main service package.

Idea screeoing
This stage is concerned with checking out which ideas will justify the time,
expense and managerial commitment of further research and study. Two
features usually associated with the screening phase are:
(a) the establishment or use of previously agreed evaluative criteria to
enable the comparison of ideas generated (e.g. ideas compatible with
the organisation's objectives and resources);
(b) the weighting, ranking and rating of the ideas against the criteria
used.
Screening systems range from the highly sophisticated involving the
collection and analysis on computers of a mass of data, to simple checklists
of a few factors considered to be vital. But it is important to stress that no
single set of criteria is appropriate for all organisations. Organisations have
to develop and adapt their own set of criteria to their particular
circumstances.
 NEW SERVICE DEVELOPMENT 301
Easingwood (1986) found evidence of widely differing practices among
service businesses in terms of the formality of their screening processes,
ranging from the formal (26 per cent) to the informal (23 per cent). He also
found that practices vary between service sectors with particularly thorough
procedures apparently applying among financial institutions.

Concept development and testing

Ideas surviving the screening process then have to be translated into service
concepts. In the service context this means concept development and
concept testing.

(a) Concept development is concerned with translating the service idea

(where the possible service is defined in functional and objective
terms) into a service concept which is the specific subjective consumer
meaning the organisation tries to build into the product idea. Thus a
building society attempting to sell the idea of regular saving to
young, unmarried people might attempt to market the idea on the
basis that participants would be saving towards house purchase and
might receive preferential treatment with a later mortgage
application.
(b) Concept testing is applicable in services context as well as in goods
contexts. Concept testing consists of taking the concepts developed
after the stages of idea generation and idea screening and obtaining
reactions to them from groups of target customers.

An associated stage of the development of the service idea is "ser\dce

positioning". Service positioning is a concept widely referred to though it
remains imprecisely defined, loosely used and difficult to measure.
Essentially positioning is the visual presentation of the Image of an
organisation's service in relation either to competitive services or to other
services in its own mix. The principle underlying this method of
presentation is that it enables service attributes to be compared with
competitive offerings and with the customer's perceptions of services relative
to his or her needs. It is widely employed in consumer goods markets and is
also finding increasing use in services markets.
Some services are best positioned directly against competition (e.g. tour
operators). Other companies develop effective strategies by deliberately not
confronting competition directly and by serving neglected market niches.
Examples of both include Avis who admitted it was number two in the car
rental market in the US and advertised that it must try harder; on the
other hand economy motels in the United States stressed low cost lodging
and eliminated swimming pools and restaurants in positioning themselves
against rivals with more elaborate services.
302 D. W. COWELL
Business analysis
This stage is concerned with translating the proposed idea into a firm
business proposal. It involves undertaking a detailed analysis of the
attractiveness of the idea in business terms and its likely chances of success
or failure. A substantial analysis will consider aspects like the manpower
required to implement the new service idea, the additional physical
resources required, the likely estimates of sales, costs and profits over time,
the contribution of the new service to the range on offer, likely customer
reaction to the innovation and the likely response of competitors. Obviously
it is not always possible to generate accurate forecasts and estimates and it
is customary to build some degree of tolerance into the analysis to allow for
the uncertainties and ambiguities involved. This stage may typically involve
some initial technical and market research and initial timings and costing
for a new service launch.

Development
This stage requires the translation of the idea into an actual service for the
market. Typically this means that there will be an increase in investment in
the project. Staff may have to be recruited or trained, facilities may have to
be constructed, communications systems may need to be established. The
tangible elements of the service will be designed and tested. Unlike goods
the development stage of new service development involves attention to
both the tangible elements of the service and the service delivery system.
Testing of new services may not always be possible. Airlines may
introduce a new class of service on a selected number of routes or a bank
may make a new service available initially oo a regional basis. But some
new services do not have such an opportunity. They must be available and
operate to designed levels of quality and performance from their
introduction. The American Express Bank, after the conduct of detailed
prior research which indicated that opening a London branch would be
successful, had ultimately to take the plunge and go ahead by establishing a
branch with a range of services (Flack 1978).
Recent empirical evidence does suggest that test marketing among service
companies is limited (Easingwood 1986). While many retailers and hotel
chains appear to undertake such testing, the more common practice in
banks, building societies and insurance companies for example, appears to
be to introduce the new service with limited promotion. The purpose is to
test whether the new service operates correctly rather than to prepare for a
national launch.

Conun ercialisation
This stage represents the organisation's commitment to a full-scale launch of
the new service. The scale of operation may be relatively modest like adding
an additional ser\dce to an airline's routes or large scale involving the
 NEW SERVICE DEVELOPMENT 3G3
national launch of fast service footwear repair outlets operating on a
concession basis. In undertaking the launch some basic decisions include:
(a) when to introduce the new service;
(b) where to launch the new service, whether locally, regionally,
nationally or internationally;
(c) to whom to launch the new service usually determined by earlier
exploration in the new service development process;
(d) how to launch the new service. Unit trusts for example may offer a
fixed price unit on initial investments for a certain time period.
With highly novel and innovative services, organisations may be guided
by the extensive literature and experience on innovation and diffusion.
However, like many areas of marketing, most documented experience in this
area has focussed upon tangibles rather than intangibles and innovation and
diffusion knowledge in the service sector requires further empirical study.
There is certainly limited evidence on the practices companies use to°
assess the benefits of a new service after launch. One difficulty stems from
service cost measurement problems particularly where service delivery
systems are shared. Another difficulty stems from the "cannibalisation" of
the company's other services due to the introduction of a new service.

SERVICE RANGE

Few service organisations offer only one service. They usually offer a mix of
services for use or purchase. The particular range will be developed in
response to internal needs or external influences. For example high street
banks now offer between 200 and 300 different kinds of services for personal
customers, partly as a response to business development but also partly as a
result of competitive pressures and customer demand. A typical service
range has both width and depth. Width refers to the number of different
service lines offered while depth refers to the assortment of items within each
service line. A service line is a group of service items sharing similar
characteristics in terms of customers, sales methods or price.
In designing a service range careful attention should be given to:
(a) what the optimum range of services should be. Most service
organisations rely on market research evidence and trial and error in
making this decision;
(b) the positioning of the range of services provided against competitors*
offerings;
(c) the length and width of the range and the complenaentarity of
services within it;
(d) the profitability of the range where profit is a key concern, as it will
be with most commercial services.
304 D. W. COWELL
Organisation of new service development
New service development succeeds best in service companies that establish a
culture for entrepreneurship and organise to nurture it. One study
conducted in a small sample of service businesses in the UK indicated that
there was widespread agreement on the merits of having one or more
individuals responsible for new service development (Easingwood 1986).
Indeed about half the companies in this study organised new service
development activity in a separate department or unit with that specific role
and most units reported through the marketing function. Though service
companies did not exhibit the kind of flexible structures approach to new
developments often found in product companies, product champions {i.e.
someone charged with developing and protecting a new idea from idea
stage to launch) were used by over 50 per cent of sampled companies.
Indeed as well as product champions other roles important in the new
service development process include "integrators" and "referees". The
integrator is someone who can step across multifunctional barriers and
encourage coordinated effort through persuasion rather than authority. The
"referee" is the counterbalance to the entrepreneurial process who develops
and gets acceptance for the rules by wliich performance will be judged
(Heskett 1986).

DISTINCTIVE FEATURES OF SERVICES

The new service development process outlined above is similar to that for
new products. There are however a number of distinctive features of services
which create special aspects and issues for service marketers. The next part
of this paper deals with these matters.

Intangibility
Services are essentially intangible. It is often not possible to taste, feel, see,
hear or smell services before they are purchased. Opinions and attitudes
may be sought beforehand, a repeat purchase may rely upon previous
experience, the customer may be given something tangible to represent the
service, but ultimately the purchase of a service is the purchase of something
intangible.
An implication of this characteristic of intangibility is that service
products can proliferate. The fact that new services are often relatively easy
to develop compared with products means that service proliferation can be
a problem and cause confusion among consumers and operational staff.
For example some airlines and British Rail have been accused of having
too many ticket varieties. While they may be intended to serve the needs of
specific target markets they can cause confusion among the travelling public
and information overload among operational staff who have to explain the
different tickets to the public.
 NEW SERVICE DEVELOPMENT 305
Inseparability
Services often cannot be separated from the person of the seller. A corollary
of this is that creating or performing the service may occur at the same time
as full or partial consumption of it. Goods are purchased, sold and
consumed whereas services are sold and then produced and consumed. The
inseparability of the creation and performance of certain kinds of services
applies particularly to some personal services (for example, dental or
medical treatment; professional services).
One result of inseparability is that the equipment and/or people who
"produce" the service may be highly visible to consumers. Important
influences upon the consumers perceptions of the service will be the physical
aspects of the service and the attitudes, behaviour and appearance of people
involved in service delivery—the operational staff. In service businesses then
operations staff perform an "operational" and a "'marketing" role. Their
feedback and suggestions therefore provide an important source of new
ideas for development. Indeed they appear to occupy another important
role. Easingwood (1986) identified that while marketing is more likely to
override operations on a service launch decision, operations is more likely to
override marketing on a cancel decision because of their closeness to the
customer and better understanding of which services will be more
acceptable in the new product development process.

Heterogeneity
It is often difficult to achieve standardisation in the output of certain
services. The standard of a service in terms of its conformity to what may be
prescribed by the seller may depend on who provides the service or when it
is provided. So even though standard systems may be used to handle a
flight reservation, book in a car for service or quote for life insurance^ each
'*unit" of service may differ from other "units". Franchise operations
attempt to ensure standards of conformity but ultimately with services it is
difficult to ensure the same level of quality of output as it may be with
goods. From the customers' viewpoint too, it is often difficult to judge
quality in advance of purchase. This characteristic of heterogeneity does
however mean that there are greater opportunities in services for marginally
different new services which nevertheless have "unique selling points".

Perishability
Services are perishable and cannot be stored. Spare seats on a package tour
or an empty hotel room represent capacity lost forever if they are not
"consumed" when they are available at any point in time. In addition
considerable fluctuating demand patterns may apply to some services which
aggravate this perishability feature further. Key marketing decisions in
service organisations relate to what service levels they will provide and how
306 D. W. GOWELL
they will respond in times of low and excessive usage (for example through
differential pricing; special promotions).

Ownersliip
Lack of ownership is a basic difference between a service and a goad. With
a service a customer may only have access to or use of a facility (for
example hotel room). Payment is usually for the use of, access to or hire of
items.
With the sale of goods, barring restrictions imposed by, say, a hire
purchase scheme, the buyer has full use of the product.

SPECIAL ISSUES FOR SERVICE MARKETERS

These features of services do seem to have an influence upon creating some
special issues for service marketers concerned with developing and launching
new services.

Probletns deriving from tke characteristics of services

Some differences between the design of marketing research for new services
and for new products stem from the characteristics of services themselves.
For example characteristics of services and their suggested impacts for the
use of marketing research particularly for new service development research
designs are:
Characteristic Effects upon Marketing Research
Intangibility (a) Where a dominantiy intangible
service, home use tests not
appropriate.
(b) Often appropriate to move directly
from concept testing to test
marketing in new product
development.
(c) *'Researchability" problem for
dominantiy intangible services.
Patenting difficult (a) Reduces incentives for large R&D
investment.
(b) More focus on "me too" services.
(c) Tendency towards service
improvement rather than
innovation.
(d) Ease of competitive entry influences
viability of new service concepts.
Standardisation difficult (a) Difficult to develop accurate
concept descriptions.
(b) problems in concept testing.
 NEW SERVICE DEVELOPMENT 307
Direct relationship between (a) Judgements of service influenced by
service performer and client who performs the service and the
client's involvement in
performance.
No clear lines of demarcation (a) Concept testing difficult because of
between a service and the place need to assess impact of performer
in which it is delivered, the and physical evidence on service
process and the people itself.

Problems in researebing ne-w services

Also the general problems of researching services with their often elusive,
and intangible qualities are aggravated when new services are being
researched. The fuzziness and ambiguity of the service concept; the
difficulty the customer may have in articulating what benefits are sought
from a service innovation and what elements the service should consist of
provide a "researchability" problem for the market researcher. A particular
problem in new service development is to identify, weight and rank the
separate elements, tangible and intangible, that make up a service offer.
These are difficult judgements for researchers to obtain from customers for
existing services. They become even more difficult with new services.
With services researchers have to be prepared to use "soft", qualitative
data particularly in conceptualising a service. Because services possess the
characteristics of perishability and intangibility their value is more often
judged in terms of benefits rather than features. This can mean that in
order to determine what a service entity is to a market, a marketer must
spend more time and effort on initial marketing research than in product
marketing as a tight service specification may be difficult to produce.
Nevertheless there are a large number of new services which have been
carefully researched including the AA Relay and Home Start services.
These problems of measurement have led to the development of new
techniques in marketing research. For example they have also led to
attempts to clarify the concept testing process for services. One framework
for concept testing a service which outlines the steps involved is presented
by Murphy and Robinson (1981).
In this framework concept testing goes through a number of steps. The
service idea starts with consumer needs analysis. Then ideas are generated
to meet these needs. Ideas are then subjected to a preliminary analysis
during which the competitive environment is considered; ideas are examined
internally and subjective judgements are made about the market; and a
preliminary external reaction from potential customers and suppliers is
obtained. The "positioning" of the service in the market is then considered
and field studies are undertaken to present the concept specifically to a
carefully selected sample of potential customers. Finally the concept is
evaluated. In particular, customer understanding of the concept is sought;
308 D- W. COWELL
customer buying and usage intentions are sought; and customer benefits are
sought. Unfavourable results may mean concept revision; favourable results
may mean test marketing (where applicable) or direct introduction of the
service (where possible). The overall purposes of this framework are to find
out whether a potential customer

* understands the idea of the proposed service;

* reacts favourably to it;
* feels it offers benefits to meet unmet needs.

Concept testing processes for services have been a relatively neglected

area of marketing management. Users of it do emphasise the need for in
depth qualitative research in the very early stages to ensure the customer
fuUy understands the need for the service being developed and the
researcher gains a clear understanding of the interaction between the
customer and the proposed service (Mouncey 1987). The growing interest in
service marketing and the importance of clearer definitions of services,
suggest this will be a significant area of development over the next few
years.
Some of the differences between services and products in fact offer
advantages to the marketing researcher. First the researcher has the
opportunity to evaluate services before the sale, after the sale and during
the sale (i.e. during the performance of the service). Unlike a product which
is produced and then consumed, some services are consumed as they are
being produced. The performer can thus obtain feedback while the service
is being produced and make appropriate adjustments where these are
required by customers. One study has shown that participating in a
marketing research investigation on site does not actually interfere with
enjoyment of a service. However, the consumers' evaluation of being a
respondent is sensitive to the costs and rewards of participation and the
service organisation needs to maintain the goodwill of the respondent.
Second, direct customer involvement with many services does allow the
user to give a direct specification of what service is required to the seller or
performer
"Most companies selling services start out with an enormous market
information advantage over the consumer product company; the service
company knows a lot about its customers. With the increasingly effective
use of internal data processing and computer applications, most service
companies can effectively provide their customer characteristics entirely
with internal data" (Hardin 1970).
Third the relatively more recent use of marketing research by service
organisations has given them certain advantages. They are able to use
proven techniques of marketing research developed in other contexts. They
can benefit by avoiding earlier mistakes and misapplications of marketing
research techniques in product fields.
 NEW SERVICE DEVELOPMENT 309
Froblenas associated witk new service features
The buyer's choice of a new service may be influenced by features
associated with it. These features may be seen as a fundamental part of the
"core" service by the consumer or as "peripheral" to the core service. In
tangible product marketing the brand, the colour, the design or the package
may be important contributory factors to the consumer's purchase decisions.
Generally such elements are less conspicuous features in service marketing
but they may nevertheless be integral components of some forms of service
planning. The relevance of some of these features is described.

Service branding. Branding is difficult because of the problems of

maintaining consistency of quality in service settings and it would seem that
branding is not used as much as it should be in services marketing. This is
surprising for, given the intangible nature of services and the difficulty of
distinguishing one service from another,, branding provides a significant
method of achieving some degree of service differentiation.

Service patents. The intangibility of services means that there are no patents.
It is thus difficult to prevent competitors from copying service innovations
though trade names can be protected. This means that innovations can
have short life-cycles because they are easy to copy. Banks and airlines are
examples where the absence of patent protection has brought large-scale
copying of practices, e.g. classes of air travel available. The absence of
patent protection is one of the characteristics which presents unique
problems to service organisations and their clients. The British Invisible
Export Council has pointed out that with regard to certain traded services,
the expertise they require makes them difficult to copy quickly. Nevertheless
strong branding can help overcome some patenting difficulties.
Service warranty. Warranties are usually related to product sales. However
tbey can be an important element in the strategy of service marketers. In
law a warranty is an undertaking on the vendor's part that the thing sold is
the vendors and is fit for use or fulfils specified conditions. Such
undertakings are of two kinds, implied and express. An implied warranty is
one that exists through legislation and applies whether the vendor extends
express warranties or not. An express warranty is one that is explicitly
provided by the vendor. Express warranties have been used in the past for
both sales promotion and vendor protection reasons. However recent
legislation (Unfair Contract Terms Act, 1977) appears now to limit the
mdor from claims once protected by express warranties.
Warranties can be of importance in marketing certain services. For
example investment schemes which guarantee payments in spite of changes
in external conditions can be a useful factor in marketing financial services.
Also organisations which carry out warranties and go beyond what is
legally required (e.g. airlines in their treatment of delayed passengers) can
benefit in the longer term by retaining customers and building goodwill.
310 D. W. GOWELl
Service after-sales. After-sale service is usually associated with the sale of
tangibles. However it too has relevance to service markets. For example, an
airline can assist passengers to arrange hire cars and book hotels as part of
their service; an insurance company can advise clients on changes they
should make to their policies as their personal circumstances change; a
stockbroker can assist a client to re-adjust a portfolio of shares; a dentist can
provide a check-up some time after providing dental treatment.
After-sale service can be an important element of the service marketing
mix. Its availability can help get a sale in the first place; it can maintain
and develop customer loyalty and goodwill; it can provide a means of
obtaining feedback about service performance; it can provide a means for
obtaining suggestions for new and improved services.

Problems associated witli the design of the service process

A significant infiuence upon a customer's perception of service quality is
how well the process of service delivery functions. The way in which service
systems operate is crucial to customer satisfaction. Those which operate
effectively and efiiciendy can give marketing management considerable
marketing leverage and promotional advantage. It is clear that a smooth
running service operation offers competitive advantages particularly where
differentiation between services is minimal. But effective and efficient
systems do not operate by chance, they operate by design. Developing and
launching a new service is as much concerned with the design of service
delivery processes and procedures as it is the design of the services
themselves. Often the service product is the service process. Many service
operations, particularly those operating multi-site operations, have to codify
operations procedures to ensure some consistency in service performance.
Some service operations have extensive procedures manuals to try to ensure
some uniformity of operation. The area of service design and service
delivery is traditionally viewed as the field of responsibility of the operations
manager but in service organisations cooperation between marketing and
operations is vital. In service systems the implications of service operational
performance and malpractice are too visible to be solely operational
concerns. The customer is so often involved as a participant in the service
delivery system that operational concerns about service delivery effectiveness
and efficiency are marketing concerns too. Particular problems associated
with the design of the service process therefore stem from the much closer
relationship that is needed between operations managers and marketing
managers. The design of service processes from a marketing perspective has
received scant attention by many service organisations so far but is
increasingly recognised as a major area in which a new service can be
differentiated from competitors offerings.

Problems associated with the use of people in new services

Service personnel are important in most organisations. They are particularly
 NEW SERVICE DEVELOPMENT 311
important in those situations where, in the absence of clues from tangible
products, the custonier forms an impression of a new service from the
behaviour and attitudes of staff involved in the service delivery system. The
design and launch of a new service therefore demands attention to the
service product, the service process and service personnel involved. How a
new service is performed will ultimately influence the image of a service
organisation. Like the design of the new service process the design of the
new service employee/customer relationship should not be left to chance.
Part of the area for attention in introducing and launching a new service is
the attention which needs to be given to the people aspects of the service.
Many service organisations that launch new services now recognise the
formal attention that has to be given to matters like selection and training
of service personnel; standardising patterns of behaviour towards customers;
ensuring consistency of appearance; conducting quality control studies
through service personnel audits. The significance of the relationship
between employee and customer has begun to receive the attention of
practitioners and academic researchers in marketing as the role of the
service "encounter" and the role of operational employees in new services
development is recognised (Ceorge and Marshall 1984).

CONCXUSION

Service marketers can benefit considerably from existing knowledge of the

new product development and launch process derived from studies of
consumer products and new industrial products. However this paper
suggests that some distinctive aspects of services may create somewhat
special issues for service marketers. Nonetheless services themselves vary
considerably in terms of their nature, form, processes and delivery so
generalisations about new service delivery and launch should be treated
cautiously.
The area of new service development is poorly documented. Further
empirical studies are required to enable more detailed and in depth
comparisons with practices in new product development. Also needed are
more exhaustive new service development studies within specific service
sectors such as financial services, professional services and leisure services to
add to our knowledge of this crucial area of marketing practice.

References
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Easingwood, C. J. (1986), "New product development for service companies", Journal of
Product Innovation Management, 4, pp, 264—275. A very helpful paper which reporls in detail
on empirical work conducted by the author.
312 D. W. GOWELL
Flack, M. (1978), "Research for financial and investment marketing decisions". Journal of the
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