CAPTURING VALUE OF SUPPLEMENTARY SERVICESGROUP - I

Roll Nos.801, 802, 803, 804, 806, 807, 808, 810, 812, 814, 815, 817, 823, 824

THINKING ABOUT VALUETHINKING ABOUT VALUE

ValueValue is the worth in monetary terms of the is the worth in monetary terms of the net economic, technical, service, and social net economic, technical, service, and social benefits a customer receives in exchange for benefits a customer receives in exchange for the price it pays for a market offering.the price it pays for a market offering.

In general, customer firms In general, customer firms pay price now pay price now and and

gain value latergain value later..

PLANNING AND CREATING SERVICES

A service product comprises all elements of service performance, both tangible and intangible, that create value for customers

The service concept is represented by: A core product Accompanied by supplementary services

AUGMENTING THE CORE PRODUCT

DESIGNING A SERVICE CONCEPT

Core Product Central component that supplies the principal,

problem-solving benefits customers seek

Supplementary Services Augment the core product, facilitating its use

and enhancing its value and appeal

Delivery Processes Used to deliver both the core product and each

of the supplementary services

AUGMENTING THE CORE PRODUCT

Are supplementary services needed to facilitate use of core product or simply to add extra appeal?

Should customers be charged separately for each service element?

Or should all elements be bundled at a single price?

CONTD…

Which supplementary services should be offered as a standard package accompanying the core

Which supplementary elements could be offered as options for an extra charge

Add ons and giveaways do not increase

profits instead they only offer flexibility to a

service portfolio

Customization is the key to wining

To achieve customization manufacturers

have

A) installed flexible manufacturing systems

B) created modular components that can be

assembled in a variety of

ways/configurations

COMMON MISTAKES MOST MANAGERS MAKE

Focus on products and not other elementsThis leads to huge impacts on costs and

profits. They add layers to existing servicesThus costlier services but no value to

customers For example: freebies reduce profit

Some of the companies are

decreasing cost of providing services

using services more effectively

Getting more out of business and

enhancing profits

Thereby giving off less freebies but still

are reaping profits

SO WHAT SHOULD THE MODEL BE???

Each customer is different- One size does not fits all

The answer lies in “flexibility in your portfolio”

STEPS TO ENHANCE THE VALUE OF SUPPLEMENTARY SERVICES

GETTING STARTED Company should turn its services to flexible

offerings Mistakes in the process

same product/ services in all the segments Too much focus on the product and core services No focus on the supplementary services Sales people often offer optional supplementary

services Not able to bifurcate between standard and optional

ASSESSING VALUE Companies rely solely on customer

satisfaction instead of assessing the value of their services

ASSESSING COSTS Activity based costing Difficulty in tracking which customer got

what service and allocating related costs Companies are organized around products

rather than around market segments or custoomers

FORMULATING FLEXIBLE SERVICE OFFERINGS1) Existing standard servicesLimiting the standard package to just the services which are valued by all customersReduce the cost of providing services at a level below the competition’s without perceiving the value to the customersSuppliers are far more reluctant to eliminate existing services than to add new onesIf the buyer buys minimum amount of Co’s products, it receives “basic ” level of services. If higher the buyer wants a higher level of services, it can pay extra.

2)Existing Optional Services Cost of an optional service exceeds

customers’ willingness to pay for it, the service should be discontinued.

Changes in technology, required expertise or insurance risks can eliminate the value of optional services.

Suppliers can help the customers that still need those services to obtain them from other companies

Certain companies chose to retain services as options and had interesting reasons to do so.

3) ADD NEW SERVICES Shrewd customers add new services to

standard offerings to thwart the competitionExample: Baxter Scientific Products

Customers have to choose from two options:1. If the competitors do not offer the service,

Baxter offered extra unique services2. If the competitors provide the same service

then they had to bear the pain of trial and tribulations.

Sometimes adding new optional services involve offering new levels of an existing standard service.

PRICING THE OFFERINGS Flexible service offerings enable managers to

be more adaptive and responsive in their pricing

When enhancing the standard offerings with additional services managers have several choices:

1. Raise the price by an amount equal to the cost of providing the service

2. Raise it less than the cost of providing service

3. Raise it slightly higher to camouflage a price increase

CREATING VALUE MERCHANTS Company requires the costs like training,

support and application assistance to be obtained from someone else’s pocket in the following ways:

1. Charging customers for problem solving provided that the customers are guilty

2. Functional areas within the Automation group3. Against substantial warranty work Work towards training salespeople in being

more persuasive. Sales representatives can assemble tailored

packages of products and services.

CONCLUSION

Following this Model , might require developing the ability to say no to customers wanting full service packages at no frills prices

If practiced deftly the implementation of flexible service offerings will give a company the reputation of being firm, consistent and fair over a period of time.

THANK YOU!!!