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Chapter 10: Managing Services for Business Markets PowerPoint by: Ray A. DeCormier, Ph.D. Central Connecticut State University 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. Customer Experience Maps • 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 Experience Map The ultimate goal of an Experience Map is to identify: 1. Importance customers place on each element of the experience. 2. Customers’ expectations for each element. 3. The customers’ perception of firm’s performance versus 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 10.1 The First Step in Understanding a Customer’s Experience is to Develop a Life Cycle Map A representative set of customer-company interactions Relationship initiation The company exposes the customer to its marketing message The customer seeks relevant information Provider evaluation Account setup The customer gets initial price and lead-time quotes The customer obtains materials for account setup The customer puts out an RFP The customer provides account profile information The customer evaluates providers and negotiates terms and pricing The customer selects the provider The company confirms setup and activation The company performs courtesy followup The customer requests product information Order placement Product reception and use The customer selects the product The customer tracks order status The customer places the order (fills out the order form The company and the customer arrange the final delivery terms The customer prepares specialty documents when required (for example, for rush delivery) The company and the customer arrange initial delivery terms The customer receives and inspects the product The customer refuses or accepts the product Problem resolution Payment Account maintenance The customer files a claim and obtains resolution The customer receives and validates the invoice The customer maintains profile information The customer notifies the company of a problem and obtains resolution The customer makes the payment The customer maintains supplies The customer seeks an invoice adjustment and obtains resolution SOURCE: David Rickard, “Winning by Understanding the Full Customer Experience,” The Boston Consulting Group, Inc., 2007, p. 6. Accessed at http://www.bcg.com The company provides general support (not related to problems) The customer obtains ongoing price quotes 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 CompanyCustomer 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 capabilities 2. Figure out how to use them to help customers to: a. Reduce costs b. Increase responsiveness c. Improve quality d. Maybe even contract to do some of the work Products provide the platform for the delivery of services. Do Service Transition Strategies Pay Off? • firms add services to their existing product offerings to make… 1. Differentiate and make offering unique 2. Stymie duplication/ imitation by rivals 3. Add value for customers - thereby enhancing profitability and firm value. • Does it pay off? • It depends… • • • • Can add revenue for slow-growth industries Can engender greater loyalty But also adds cost and can degrade productivity Can become “expected” by customers who adopt an attitude of entitlement and refuse to pay extra 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. Services Are Different They consist of… Deeds, Processes, and Performances …that are intangible. Continuum – Tangible to Intangible 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 Business Product-Service Continuum – Tangibility Based 12 How Services Differ from Goods Inseparable – produced and consumed simultaneously Non-standardized Heterogeneous Perishable – Use it or Lose it Intangible – Lacks ownership Unique Service Characteristics Business services that are intangible-dominant market offerings. Few services are totally intangible – they often contain elements with tangible properties. 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. Segmenting Services Segmentation 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 Package The service package can be thought of as the product dimension of service, to include: 1. Essential concept of the service 2. Range of service provided 3. 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. Conceptualizing the Service Product Customer–Benefit Concept 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 Delivery System The final element addresses: “How is the service going to be provided?” This includes: 1. Jobs that qualified people are going to do 2. Necessary equipment, facilities and layout 3. Carefully developed procedures that insure successful delivery of the service Service-Savvy Sales Force • Moving from product-related selling to product/service-related selling demands new approaches. • Services often requires: – A long sales cycle – A complex sales process – Senior executives on both the selling and buying sides • To foster a successful relationship, many companies employ a diverse sales force where: – One salesperson hunts for product sales – Another provides the service with the goal of developing the relationship Profitability of the Service Many marketers offer a myriad of services such as: 1. Next-day delivery 2. Customized handling 3. Specialized labeling 4. Tracking 5. Etc. The question is: Are these additional services profitable? Service Promotion • Services are promoted in similar fashion as products. However, being intangible, the service should be associated to some tangible form by its marketers. • Example: Service marketers enhance differentiation by creating tangible clues such as: – – – – – Logos Uniforms Building appearance Color schemes Or something specific to the service