Chapter 9:
Managing Services for
Business Markets
PowerPoint by:
Ray A. DeCormier, Ph.D.
Central Connecticut State University
A.
B.
C.
D.
What is the value of systematically monitoring the
customer experience?
What is the central role that business services
assume in customer solutions?
What do the roles of service quality, customer
satisfaction and loyalty assume in service
marketing success?
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 Experience 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
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
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 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
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:
Define their own capabilities
2. Figure out how to use them to help customers to:
1.
a.
b.
c.
d.

Reduce costs
Increase responsiveness
Improve quality
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 customercompany relational processes that involve:
1. Defining customer needs
2. Customizing, integrating and deploying products
& services
3. Providing post-deployment customer support
Aimed at meeting (solving) business customers’ needs
(problems).
DO SERVICE TRANSITION STRATEGIES PAY OFF?


1.
2.
3.
To improve competitiveness many firms add
services to their existing product offerings to
make…
1. The firm’s value offering more unique
2. Duplication difficult for rivals
3. Products more valuable to customers
… thereby enhancing profitability and firm value.
Does it pay off?
Confirmation comes when firms that add
services see an increase in sales from 20 – 30%.
Adding services is more effective for firms that
relate the service to their core products.
Adding services is effective in turbulent or slow
growth industries, but counterproductive in
stable or high growth industries.
14




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
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.
II.
III.
New avenues of growth
New ways to differentiate
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 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 CLASSIFICATION
BASED ON TANGIBILITY CONTINUUM
22
How Services Differ from Goods
Inseparable – produced and
consumed simultaneously
Non-standardized
Heterogeneous
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 Services
• 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.
5 Dimensions of Service Quality
Developed by Cool Pictures and MultiMedia Presentations
Copyright © 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
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 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 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 Defections
 There 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.
2.
3.
The firm can charge more.
The cost of doing business is reduced.
Long-term customers provide word-of-mouth advertising.
 Therefore, the strategy is to:
1.
2.
3.
Track defections to find out “why.”
Recognize that continuous improvement is not a cost but
an investment in a customer that generates profits.
Measure return on quality.
Marketing Mix for Service Firms
Meeting the needs for the service market requires
an integrated marketing strategy that:
1.
2.
3.
4.
Selects a target segment.
Customizes the service marketing mix (4 P’s).
Promotes a relationship vs. a transactional
approach.
Emphasizes the total buyer-seller interaction
process.
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
36
 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 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 & 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. Attitude
2. Skill
3. Knowledge
4. Behavior
have a critical effect on customer’s level of
satisfaction with the rendered service.
Hybrid Offering
Combination 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
 The installed base of products at customer
organizations represents a unique asset
for most manufacturing firms.
 Four resources: 1. Installed base;
2. Product development assets; 3. Sales
force; and Field service organization

43
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