capturing value of supplementary services
TRANSCRIPT
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!!!