Chapter 9:

Managing Services for Business Markets

A. What is the value of systematically monitoring the customer experience?

B. What is the central role that business services assume in customer solutions?

C. What do the roles of service quality, customer satisfaction and loyalty assume in service marketing success?

D. How offerings that combine products and services

can be created to deliver value to customers

From Products to Solutions

Many companies, especially smaller ones, start by developing a product to replace an existing product. This is the “building-a-better-mousetrap” mentality.

Many companies also think that the best way to win customers is to develop a superior product and continually work to make it better.

In other words, they start with the product & services first and consider customer relations as an afterthought.

This is an error in thinking!A better approach is to understand the

customer by mapping out experiences.

Customer Experience Approach

Recent research discovered that only 8% of customers think that their experience with their vendors were superior, whereas 80% of vendors think that they delivered a superior one.

This research points out an obvious disconnect.

By focusing on core products instead of understanding the customer’s experience, many companies lose their customer and never know why.

Also, by not understanding the customer, companies lose an opportunity to create value and cement relationships.

One way to understand the customer better is to “Map” out experiences at various “touchpoints.”

Touchpoints are spots where a seller has direct or indirect contact with the customer about the product or service over time.

The map points out what is most important in the seller/customers’ experience.

Ultimate Goal of Ultimate Goal of Experience MapExperience Map

The ultimate goal of an Experience Map is to identify:1. The value that customers place on different levels

of performance for each element of the experience.

2. The customers’ minimal expectations for each element.

3. The customers’ perception of the firm’s performance versus that of key competitors.

Once the map is developed, the next step is to meet with the customer and pare down the list to the most critical issues.

Customer Experience Life Cycle Map

Figure 9.1 The First Step in Understanding a Customer’s Experience is to Develop a Life Cycle Map

A representative set of customer-company interactions

Relationshipinitiation

The company exposes the customer to its marketing message

The customer seeks relevant information

Providerevaluation

The customer gets initial price and lead-time quotes

The customer puts out an RFP

The customer evaluates providers and negotiates terms and pricing

The customer selects the provider

Account setup

The customer obtains materials for account setup

The customer provides account profile information

The company confirms setup and activation

The company performs courtesy follow-up

The customer requests product information

Accountmaintenance

The customer maintains profile information

The customer maintains supplies

The company provides general support (not related to problems)

The customer obtains ongoing price quotes

Payment

The customer receives and validates the invoice

The customer makes the payment

Problemresolution

The customer files a claim and obtains resolution

The customer notifies the company of a problem and obtains resolution

The customer seeks an invoice adjustment and obtains resolution

Productreceptionand use

The customer tracks order status

The company and the customer arrange the final delivery terms

The customer receives and inspects the product

The customer refuses or accepts the product

Orderplacement

The customer selects the product

The customer places the order (fills out the order form

The customer prepares specialty documents when required (for example, for rush delivery)

The company and the customer arrange initial delivery terms

SOURCE: David Rickard, “Winning by Understanding the Full Customer Experience,” The Boston Consulting Group, Inc., 2007, p. 6. Accessed at http://www.bcg.com

Product- to a Solution-Centered Approach

Don’t start with product first. Instead, start with understanding the customer’s problem and end with products and services that solve that problem.

The exchange should not be transaction-based but rather be an interactive exchange with the objective of developing a relationship around c0-creating value with the customer.

Work with the CustomerWork with the Customer

◦Co-creating value means that products and services are developed in concert (integrated) with the customer such that its benefits provides solutions to customer problems.

◦Services are a critical feature of the solution: It provides a valuable basis for competitive advantage.

It’s an important driver of profitability.

From a Product to a Solutions Perspective

Product Perspective Solutions Perspective

Value Proposition

Win by creating innovative products and enriching features of existing products

Win by creating and delivering superior customer solutions

Value Creation

Value is created by the firm

Value is co-created by the customer and the firm

Designing Offerings

Start with the product or service, and then target customer segments

Start with the customer problem, and then assemble required products and services to solve the problem

Company-Customer Relationship

Transaction-based Interaction-based and centered on the co-creation of solutions

Focus on Quality

Quality of internal processes and company offerings

Quality of customer-firm interactions

DETERMINE UNIQUE CAPABILITIES

Before developing solutions, B2B firms must:

1. Define their own capabilities2. Figure out how to use them to help customers

to:

a. Reduce costsb. Increase responsivenessc. Improve qualityd. Maybe even contract to do some of the

work

Products provide the platform for the delivery of services.

The authors suggest that many sellers think that providing a solution is a customized and integrated combination of products and services for meeting customer needs.

However, customers view a solution as a set of customer-company relational processes that involve:1. Defining customer needs2. Customizing, integrating and deploying

products & services3. Providing post-deployment customer

supportAimed at meeting (solving) business customers’ needs (problems).

DO SERVICE TRANSITION STRATEGIES PAY OFF? To improve competitiveness many firms add

services to their existing product offerings to make…1. The firm’s value offering more unique2. Duplication difficult for rivals3. Products more valuable to customers

… thereby enhancing profitability and firm value.

Does it pay off?1. Confirmation comes when firms that add

services see an increase in sales from 20 – 30%.2. Adding services is more effective for firms that

relate the service to their core products.3. Adding services is effective in turbulent or slow

growth industries, but counterproductive in stable or high growth industries.

Defining Customer Requirements and Business Needs

Customizing and Integrating Good and Services to Fit Customer’s Requirements

Deploying and Installing Products in a Customer’s Environment

Providing Ongoing Post-deployment Customer Support

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Customer adaptiveness refers to the degree to which a customer is willing to adjust its routines and processes to accommodate a supplier’s products.

Solution effectiveness is enhanced if the customer provides information and guidelines concerning the priorities and sensitivities of various stakeholders in the customer firm.

Solution effectiveness can be enhanced if the customer provides counseling to a supplier concerning the unique elements of its operations.

It offers:

I. New avenues of growth

II. New ways to differentiate

III. Higher customer loyalty

Growth Opportunities

Services, by their very nature, offer far more than core products can offer.

However, marketers need to understand the true need (problem) that core products presently solve.

Next, when looking at the core need, ask, “Are there other ways to solve that problem?”

Other ways can lead to new products.

Service Solutions Facilitates Differentiation

Business marketers who emphasize solutions sustain differentiation because solutions offer a wider variety of services that can be customized to meet customers’ unique needs.

By co-creating solutions, business marketers enhance loyalty resulting in the customer creating barriers for competition.

All Products Are Services Most marketers know that all

products are really just wrapped-up services.

So how do we distinguish between services and products?

Generally,1. Services are intangible.2. Products are tangible.

They consist of… Deeds, Processes, and Performances …that are intangible.

Continuum – Tangible to Continuum – Tangible to IntangibleIntangible

The Continuum suggest that there are very few pure products or very few pure services.

It’s a useful tool for understanding the product-service definition issue.

Many services are a combo of services and products. Example: hotels – offer sleeping service to food products

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BUSINESS PRODUCT-SERVICE CLASSIFICATION BASED ON TANGIBILITY CONTINUUM

Inseparable – produced and consumed simultaneouslyInseparable – produced and consumed simultaneously

Non-standardizedHeterogeneous

Non-standardizedHeterogeneous

How Services Differ from How Services Differ from GoodsGoods

Perishable – Use it or Lose it

Intangible –Lacks ownership

Business services that are intangible-dominant market offerings. Few services are totally intangible – they often contain

elements with tangible properties.

What is a good service? A good service is

one that meets or exceeds the customer’s expectations.

Therefore, marketers should position their service a bit below what they, in fact, can deliver.

Under-promise and over-deliver!

5 Dimensions for Business 5 Dimensions for Business ServicesServices

• Customers tend to focus on five dimensions in evaluating business service quality.

1. Reliability

2. Responsiveness

3. Assurance

4. Empathy

5. Tangibles

• Among these dimensions, reliability – delivery on promises – is most important to customers.

Copyright © 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.Developed by Cool Pictures and MultiMedia Presentations

5 Dimensions of Service Quality

Customer Satisfaction and Loyalty

Customer-linking processes that affect satisfaction:

1. Basic elements of the product or service that customers expect all competitors to provide.

2. Basic support services, such as technical assistance or training, that makes product more effective.

3. A recovery process for quickly fixing product or service problems.

4. Extraordinary services that so excel in solving customers’ unique problems or in meeting customer needs that these services make the product or service seem customized.

Service RecoveryService Recovery

Sometimes there are problems.

The firm did not do everything it promised.

What should they do?

The way to address this is to institute a service recovery strategy.

Service Recovery StrategyService Recovery Strategy Service recovery strategy encompasses

procedures, policies, and processes that firms use to resolve customer service problems promptly and effectively.

One way of resolving a discrepancy is to negotiate the resolution.

“What’s it going to take for you to be very satisfied with the resolution of this complaint?”

Service providers who satisfactorily resolve service failures often see their customer’s level of perceived service quality rise.

Also, solving service problems helps correct shortcomings in the first place, and

Can lead to the development of a new feature or even a new product.

Zero DefectionsThere is no such thing as zero defections, however

providing high quality service has an effect of keeping customers longer.

It is beneficial in terms of sales and profits because:1.The firm can charge more.2.The cost of doing business is reduced.3.Long-term customers provide word-of-mouth Publicity.

Therefore, the strategy is to:1.Track defections to find out “why.”2.Recognize that continuous improvement is not a cost

but an investment in a customer that generates profits.3.Measure return on quality.

Marketing Mix for Service FirmsMeeting the needs for the service market requires an integrated marketing strategy that:

1. Selects a target segment.2. Customizes the service marketing mix

(4 P’s).3. Promotes a relationship vs. a

transactional approach.4. Emphasizes the total buyer-seller

interaction process.

Segmenting ServicesSegmentation demands that a group must be large and homogeneous enough to support a marketing effort.

First, service segments are often narrower because customers expect services to be customized.

Second, service segmentation focuses on what business buyers expect as opposed to what they need.

Third, segmenting service markets help firms adjust their service capacity more effectively.

Total demand is made up of many small segments, thus they are able to control them more easily and predictably.

Developing the Service PackageThe service package can be thought of as the product dimension of service, to include:

1.Essential concept of the service2.Range of service provided3.Quantity, quality and level of service

In addition:Service package must consider some factors unique to services – personnel, physical product and a process for providing the service.

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Conceptualizing the Service Conceptualizing the Service ProductProduct

Customer–Benefit Concept is understanding those service attributes that are important to the customer. They include…

a.Functional, b.Effectual, and c.Psychological components

… that result in a successful service experience.

Consistent quality is the goal so quality-control is of utmost importance.

Service Concept

The service concept defines the general benefits that customers will receive from the service provider’s bundle of goods and services.

Notice the future tense: “will”

Service Offer

The service offer spells out in more detail the who, what, where, when, and to whom the service will be provided.

The service elements make up the total service package to include both tangible and intangible components.

Service Delivery SystemService Delivery System

The final element addresses: “How is the service going to be provided?”

This includes:1.Jobs that qualified people are going to

do2.Necessary equipment, facilities and

layout3.Carefully developed procedures

that insure successful delivery of the service

Service & Delivery

For tangible products that demand service, both the service performance and the delivery system create and deliver product benefits to the customer.

For example: The tangible product (copy machine) needs to be cleaned and serviced. If either the service or delivery system fails, the product fails. If both are good, then customers consider the total package good.

Service Personnel

Finally, the importance of employing good people cannot be emphasized enough.

In short, personal qualifications, i.e.:1.Attitude2.Skill3.Knowledge4.Behavior

have a critical effect on customer’s level of satisfaction with the rendered service.

Hybrid OfferingHybrid OfferingCombination of one or more goods and

one or more services that together offer more customer benefits than if the good and service were available separately

Distinctive Capabilities to Launching Hybrid Offerings

•Service-related data processing and interpretation capability

•Execution risk assessment and mitigation capability

•Design-to-service capability•Hybrid offering sales capability•Hybrid offering deployment capability

Hybrid Service Offerings Classification

•Product life cycle services•Asset Efficiency services•Process support services•Process delegation services

Happy Dusshera