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Market scanning for new service development

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European Journal of Marketing ; Volume 40. p. 466–484. 2006

Olsen, Nina Veflen; Sallis, James

Purpose – The purpose of this paper is to develop and test a theoretical model of narrow and broad market scanning in a service industry, including short- and long-term outcomes. Design/methodology/approach – In a cross-sectional survey, structural equation modeling is used to test the hypotheses on a sample of 126 hotel managers in Norway. Findings – Given that services often involve direct interaction between the customer and the provider, customers play a more active role in the service development process. This has ramifications for how service firms scan their environment and, in turn, for incremental and discontinuous innovation. It is found that narrow and broad scanning each affect the new service development process in a unique way. Narrow scanning has a strong positive effect on profitability through incremental service adaptation; broad scanning has a weak but significant effect on profitability through incremental service adaptation, and broad scanning positively influences spin-off knowledge. Research limitations/implications – The two greatest limitations of the research, which translate into important avenues for future research, are to develop a better measure of discontinuous innovation, and to test the model in an alternative setting, because hotels are very dependent on locality and surroundings. Practical implications – When developing services, services managers must distinguish between short- and long-term performance, and how they scan their markets. Adapting to customers to the exclusion of exploring new opportunities threatens long-term viability.

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