Chris Storey

New service development: a review of the literature and annotated bibliography

Provides a review and ready reference to recent writings on new service development (NSD), especially for the financial services sector. Discusses the types of new service development, the purposes served by them and the processes. Refers to the key activities of NSD and measures its success. An annotated bibliography supplies a very useful guide to the new service development literature.

New service development: initiation strategies

This paper addresses the issue of initiating new service development (NSD) projects. The aim of the article is to investigate whether firms use systematic procedures to generate and screen ideas for new services. Utilising a survey of marketing managers in UK service companies, data were collected in the areas of NSD strategy, idea generation and screening. It was found that only half the sample have a formal NSD strategy, idea generation is undertaken on an ad hoc basis and idea screening, although more prevalent, is failing to support the NSD strategy. Management implications and areas for further research are discussed.

Determinants of new product performance: A study in the financial services sector

Contributes to the growing body of information on the determinants of performance in new products. Examines a sample of “typical” new products (instead of the more usual comparison of successes and failures) and identifies the factors that are crucial for producing outstanding performance in the financial services sector. Shows that marketing factors (i.e. effective distribution and effective communications) are the keys to new service success. In addition demonstrates the importance of the quality of the service offered and the quality of the tangible evidence of the service as a basis of outstanding performance. These key determinants of performance need to be built on the skills of the frontline staff and the push they give to the new product. Reiterates the importance of synergy when developing new products. Product advantage is not the key success factor, contrary to previous findings in other sectors. Attributes this to the nature of the sector studied (financial services) where sustainable competitive product advantage is rarely achieved. Makes a comparison between success factors for consumer services and industrial products/services.

The Augmented Service Offering: A Conceptualization and Study of Its Impact on New Service Success

Abstract Unlike companies that produce tangible goods, service firms typically cannot rely on product advantage as a means for ensuring the success of a new service. Developing a competitive response to a tangible product may require significant investments of time and effort. In many cases, however, competitors can easily duplicate the core elements of a firm’s new service. This fundamental difference between new products and new services means that managers who hope to find the keys to new-service success must look to factors other than sustainable product advantage. Chris Storey and Christopher Easingwood suggest that managers must understand the totality of the service offering from the customer’s perspective. They explain that the purchase of a service is influenced not only by the service itself, but also by such factors as the service firm’s reputation and the quality of the customer’s interaction with the firm’s systems and staff—in other words, by the augmented service offering (ASO). Using the results of a study they conducted in the consumer financial services industry in the U.K., they identify the components of the ASO, and they examine the relative contributions of these components to the success of new services. In their model, the ASO comprises three elements: the service product, service augmentation, and marketing support. The core of the ASO—the service product—includes such dimensions as product quality, product distinctiveness, and perceived risk. The study’s results suggest that improvements in the service product open up new opportunities for the firm, but have only modest effects on sales and profitability. Rounding out the ASO model are service augmentation and marketing support. Service augmentation encompasses such dimensions as distribution strength, staff-customer interactions, and reputation. The customer recognizes and responds to these elements of the ASO, but they are not part of the product core. Marketing support involves those marketing and management actions that affect the quality of the product and its augmentation, even though customers typically are not aware of them. These elements include knowledge of the marketplace, training of contact staff, and internal marketing. Enhanced service augmentation has significant effects on profitability and sales for the firms in this study, but it does not offer enhanced opportunities. The marketing support elements contribute significantly to all aspects of performance for the firms in this study.

Measuring the Performance of New Service Development Activities

The aim of this research was to investigate how service firms evaluate their new service development (NSD) activities. A survey of marketing managers in UK service firms was used to elicit information on two subject areas. First, the firms approach to NSD, its strategy, and the scope of its activity in this area. Second, the firms approach to measuring performance at both the project and the programme level. It was found that although new services are an important source of revenue for most, firms are still not satisfied with their ability to develop new services. On the whole, service firms employ a limited number of measures of performance, and often these do not reflect the reasons behind development. Significantly, financial measures of performance are most often used by less innovative firms, fast followers employ customer-based measures of performance, and truly innovative firms measure performance along a number of softer internal dimensions. The management implications of these findings are discussed.

Success factors for new consumer financial services

A study of the characteristics of successful new consumer financial products is described. The first stage of the investigation involved the identification of financial product attributes possibly associated with success. A total of 43 were found. Information was then collected on these attributes for 77 new financial products and was simplified by grouping into nine distinct factors. The article describes all nine factors in detail with illustrations. Four of the factors are particularly associated with success. They are: “overall quality” (the product, the delivery system, after‐sales service, the organisation′s reputation for quality); having a differentiated product (being first, being innovative); product fit and internal marketing (the new product complementing existing products and receiving the support of staff); and use of technology.

On-line banking: Strategic and management challenges

On-line or electronic delivery is the newest delivery channel to be offered by the retail banks, and there is wide agreement in the industry that this channel will have a significant impact. This article identifies the approaches being adopted by UK retail banks and the strategies underlying those approaches. The management problems and concerns in implementing these services are identified and discussed.

Types of New Product Performance: Evidence from the Consumer Financial Services Sector

Using the results of a large survey of new consumer financial services, this research investigates the benefits that new products bring to a company. It is argued that merely assessing sales, market share, and profits (“product benefits”) ignores such wider reasons for developing new products as developing a market or improving customer loyalty (“company benefits”). Three distinct dimensions of performance are identified: sales performance (e.g., sales and market share); profitability, and enhanced opportunities (longer-term company benefits). All are related to success. However, it is found that highly successful new products must produce multiple benefits. It is also found that approximately half the value derived from the introduction of the new products is derived from company benefits. As such, these wider benefits should be used as performance measures for new products. When evaluating new products, firms base the evaluation almost entirely on financial criteria (e.g., revenue, profit, or profit margin) or other such closely related measurable items as sales volume and market share (Griffin and Page, 1993). However, using financial criteria alone takes a very narrow view as to the extent of benefits to the company of developing new products. It has been found that many products are specifically launched to complement existing products, to use company resources more fully, to broaden or improve the company image, to diversify, or to grow into new markets (Shipley, Edgett, and Forbes, 1991). Therefore, it can be argued that these are the important benefits that a new product brings to a firm, not the level of sales or profitability. As such, these wider benefits should be used as performance measures for new products. However, this is only slowly gaining acceptance in practice. Even “failures” in financial terms can be considered to be successful if these wider benefits are taken into account. For example, Maidique and Zirger (1985) found that in a number of cases, new product failures contributed “to subsequent successes by augmenting the organizations knowledge of new markets of technologies or by building the strength of the organization itself.” Similarly, Souder (1988) modified the definition of technical failure in new product development projects to “high” and “low” failures, depending upon the extent of technical knowledge gained. This article considers the importance of these wider benefits of new product development in the context of new services. These wider benefits are termed “company benefits” to distinguish them from financial and sales-based benefits (termed “product benefits”). Company benefits accrue to the firm as a whole; whereas, product benefits are measured in relation to the individual product. To date, there has been virtually no attempt to study empirically the wider range of measures of performance (Hart, 1992). However, given “the notion that superior performance requires a business to gain and hold an advantage over competitors” (Day and Wensley, 1988), it is vital to understand these benefits. This article explores the nature of these benefits and reports the results of recent empirical research into the performance of new consumer services. The consumer services a sector chosen for examination is financial services. Specifically, this research identifies the different types of benefits new service products are producing for firms; explores the relationships between company benefits, product benefits, and new product success, and assesses the relative importance of different types of benefits.

Marketplace success factors for new financial services

Examines the effects of service offered on the success of new customer financial services in the United Kingdom. Shows that previous research has concentrated on the new product process ignoring what are termed direct factors (characteristics that affect the interaction between the service offered and the consumer). Finds that a number of characteristics describing the service core and the augmented service offering are highly correlated with success.

The Role of Knowledge Management Strategies and Task Knowledge in Stimulating Service Innovation

Are service firms that enact strategies to manage their new service development (NSD) knowledge able to generate a sustainable competitive advantage (SCA)? Based on analysis of data from a large survey of service companies, the answer is yes. The authors find that companies employing the knowledge management strategies of codification and personalization reflect higher levels of NSD knowledge. However, the two strategies vary in their individual performance outcomes, with codification promoting NSD proficiency (an ability to execute NSD activities) and personalization promoting greater NSD innovativeness (market perception of the company as novel and as an innovator). When used together, the two strategies magnify NSD knowledge, which when combined with NSD proficiency and NSD innovativeness, promote an SCA. Therefore, companies planning to invest in a knowledge management system should heed the outcomes desired from their NSD process. A system based on documentation exemplifies a codification strategy and will drive NSD proficiency; a system emphasizing interpersonal communication exemplifies a personalization strategy and will drive NSD innovativeness. A system that blends the two strategies appears the most advantageous for service companies’ NSD efforts aiming to build a long-term sustainable competitive advantage.