Module 1: Understanding Consumers and Market

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Developing Service Products - Part 2

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Understand branding at the corporate and individual service product level.
Examine how service firms use different branding strategies.
Understand how branding can be used to tier service products.
Discuss how firms can build brand equity.
Understand what is required to deliver branded service experience.
List the categories of new service development, ranging from simple style changes to major innovations.
Describe how firms can achieve success in new service development.


Branding helps marketers to establish a mental picture of the service in customers’ minds and to clarify the nature of the value proposition.
Distinctive brand names of individual service products enables the firm to communicate the distinctive experiences and benefits associated with a specific service concept to the target market.


Service organizations offer a line of products rather than just a single product.
Four broad branding alternatives:

Branded House
Endorsed Brands
House of Brands


Branded House — used to describe a company, that applies its brand name to multiple offerings in often unrelated fields.
For example- Virgin Group

Applies its brand name to multiple offerings in often unrelated fields.
Core business is travel, entertainment, and lifestyle, but it also offers financial services, healthcare, media, and telecom services.

Demerit- brand gets overstretched and weakened.
Sub-brands — the corporate or the master brand is the main reference point, but the product itself has a distinctive name
For example- Singapore Airlines

Singapore Airlines Raffles Class, denoting the company’s business class, and
Singapore Airlines Suits is “beyond first class A380

Endorsed Brands — the product brand dominates but the corporate name is still featured.

For example- Intercontinental Hotel Group is itself a well known group. But its product brands are dominant.

House of Brands — the corporate brands and its well-known sub brands.
For example- Yum! Brands, Inc.
Its restaurant brands:

Pizza Hut
Taco Bell

For a multi-brand strategy to succeed, each brand must promise a distinctive value proposition, targeted at a different customer
Sometimes segmentation is situation-based:

The same individual may have different needs (and willingness to pay) under differing circumstances, such as when traveling with family or traveling on business.

A multi-brand strategy is aimed at encouraging customers to continue buying from within the brand family.
Loyalty programs are often used to encourage this, whereby. loyalty points are collected in one sub-brand when on business travel, but are then redeemed through another brand on leisure trips.


In a number of service industries, branding is not only used to differentiate core services, but also to clearly differentiate service levels. This is known as service tiering.
It is common in industries such as hotels, airlines, car rentals, and computer hardware and software support.
Other examples of tiering include healthcare insurance, cable television, and credit cards


Avis Car Rental
Focus- consumer customers and business customers
Service tiering for consumer customers based on:

different car classes (subcompact, compact, intermediate, standard, full size, specialty, signature, premium, luxury, standard elite SUV, intermediate SUV, full size SUV, premium SUV, convertible, minivan, and passenger van).
services (with or without driver)


Brand equity is the value premium that comes with a brand - what customers are willing to pay for the service, beyond what they are willing to pay for a similar service that has no brand.
Components of Brand Equity

Company’s presented brand — mainly through advertising, service facilities and personnel.
External brand communications — from word-of-mouth and publicity. These are outside of the firm’s control.
Customer experience with the company —what the customer has gone through when they patronized the company.
Brand awareness — the ability to recognize and recall a brand when provided with a cue.
Brand meaning — what comes to the customer’s mind when a brand is mentioned.
Brand equity — the degree of marketing advantage that a brand has over its competitors.


Company's marketing and external communications help to build brand awareness. :
However, it is the customer’s actual experience with the brand, or the “moments of truth”, which are more powerful in building brand equity.
Firms need to focus on customers, deliver great experiences, and create an emotional connection with their customers.


Align the service product and brand with its delivery process,servicescape and people with the brand proposition.
Having processes in place.Creation of emotional experience that can be done effectively through the servicescape.
Building of interpersonal relationships, where trust is established between the consumers and the firm’s employees.
Investing in employees for they will be the ones who can deliver the brand experience that creates customer loyalty.


Hierarchy of New Service Categories

Style changes represent the simplest type of innovation,typically involving no changes in either processes or performance. Examples include redesigning retail branches,websites or new uniforms for service employees.

Service improvements involve small changes in the performance of current products, including:

improvements to either the core product or
to existing supplementary services.

For example, the Lydmar hotel in Stockholm has a series of buttons where passengers can choose their music from a choice of garage,funk, and rhythm and blues.
This is just a simple improvement that can add to a customer’s experience as it is unique and surprising.
Supplementary service innovations take the form of adding new facilitating or enhancing service elements to an existing core service or significantly improving an existing supplementary service.
Low-tech innovations for an existing service can be as simple as adding parking at a retail site or agreeing to accept payment via smartphone for payment.
Process line extensions offer more convenience and a different experience for existing customers, or attract new customers who find the traditional approach unappealing.

Often, they involve adding a lower-contact distribution channel to an existing high-contact one, such as having self-service to complement delivery by service employees, or creating online or app-based service delivery.

Product line extensions are additions to a company’s current product lines. For example, a restaurant may extend the product line to offer dog lovers a menu as well, so both the owners and their dogs are able to dine in the same restaurant.
Major process innovations consist of using new processes to deliver existing core products in new ways with additional benefits. For example, online courses are transforming higher education by using cutting edge technology, the Internet and smart devices.
Major service innovations are new core products for markets that have not been previously defined. For example, Amazon diversified into providing on demand computing power and became a leader in cloud computing services.


Reasons for failure include:

not meeting a consumer need,
inability to cover costs from revenues, and
poor execution

As per an study in the restaurant business, a failure rate of about 26% during the first year rising to close to 60%within three years.
Organizational factors

There are strong inter-functional cooperation and coordination.
Development personnel need to be fully aware of why they are involved and of the importance of new products to the company.
Before the launch, staff must understand the new product and its underlying processes, as well as details about direct competitors.

Market research factors

Detailed and scientifically designed market research studies are conducted early in the development process with a clear idea of the type of information to be obtained.
A good definition of the product concept is developed before undertaking field surveys.


Different branding service strategies were discussed including branded house, house of brands, endorsed brands, sub-brands.
Concept of service tiering along with examples were explained.
Brand building and its components were also covered.
Service branding model was also shown.
Finally, hierarchy of new service development and the factors required in achieving success in it,is discussed.