DrChristopherLovelock.pptx

DrChristopherLovelock.pptx

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ADDINGVALUETHROUGHSERVICE:

STRATEGIESFORCOMPETITIVEADVANTAGE,DrChristopherLovelockYaleUniversityBeijing16September2002,Overview,Successfactorsinservice-drivenbusinessesCreatingvalueforcustomersthroughserviceTheFlowerofService:

coreandsupplementaryelementsCustomerloyaltycreatesvalueforthefirmSomestrategiestoimprovesuccess,WhyEffectiveManagementofServicesWillBecomeMoreImportantforChina,MoredemandforservicesfromdomesticconsumersaspercapitaincomerisesTourismstimulatesdemandformanyservicesIncreasedsophisticationinmanufacturingmayinvolveemphasisonvalue-addedservicesEntryofinternationalservicefirmsintoChinesemarkettransfersexpertiseGovernmenteconomicandsocialpoliciesoftenemphasiseimprovedservices,TheManyFacesofService,Serviceisthecoreproductoftheindustry（e.g.,insurance,transport,hotels,banking）Servicesupplementsandaddsvaluetoamanufacturedgoodmanufacturerprovidesservicetoendusersintermediaryprovidestheservice（e.g.,retailer）Servicetointermediaries-helpthemtodoabetterjobsellingproductstoendusersServicetosuppliers-buildsrelationshipsandmakespurchaseranattractivecustomerInternalservices-withinfirmtootherdepartments,branches,employees（e.g.legal,accounting,humanresources）,TenCharacteristicsofSuccessfulServiceBusinesses,ClearstatementofmarketpositionrelativetocompetitorsandtargetcustomersEasytodobusinesswithforcustomersandsuppliersFocusonbuildingcustomerloyaltybycreatingvalueOpentoinnovationandnewwaysofworkingSeekcontinuousimprovementsonqualityandproductivity,TenCharacteristicsofSuccessfulServiceBusinesses（cont）,MakeintelligentuseoftechnologyInvestinrecruitment,training,andmotivationofemployeesActivelyseekfeedbackfromemployeesandcustomersExceptionalatanticipatingandresolvingproblemsTakealongtermview,2,Successfactorsinservice-drivenbusinessesCreatingvalueforcustomersthroughserviceTheFlowerofService:

coreandsupplementaryelementsCustomerloyaltycreatesvalueforthefirmSomeStrategiestoImproveSuccess,CreatingandKeepingCustomers:

ValueistheKey,“Therecanbenocorporatestrategythatisnotmarketingoriented.Thepurposeofabusinessistocreateandkeepacustomer.Todothatyouhavetodothosethingsthatwillmakepeoplewanttodobusinesswithyou.”THEODORELEVITTTHEMARKETINGIMAGINATION,HowPerceivedValueAffectsCustomerChoice,Customersrelatevalueofbenefitsreceivedfromagoodorservicetothecostsofacquisition/usage“Badvalue”or“goodvalue”assessmentsrelatetonetvalueafterdeductingcostsfrombenefitsCustomerschoicesareshapedby:

whattheycanafford（morethanjustmoney）howwellbenefitsofferedmatchtheirneedswhichcompetingalternativeoffersthehighestperceivednetvalue,PerceivedBenefits,P,e,r,c,e,i,v,e,d,Costs,Time,e,Effort,CustomersWeighPerceivedBenefitsagainstPerceivedCoststoAssess“NetValue”,FiveTypesofCosts,MoneyTimePhysicaleffortMentaleffortandnegativefeelingsSensoryburdensUnattractivesightsUnwantednoisesUncomfortablefeelNastytasteUnpleasantsmell,“TimeisMoney”,TherearenotimebillionairesBusypeoplehavelessdisposabletimeWeusethesameverbsfortimeandmoney:

SpendSaveInvestLoseWasteAreyoustealingyourcustomerstime?

NetValue=（Benefits-Costs）,NetvaluedrivesrelationshipsNetvalueisafunctionofbothcostsandbenefitsValuecanbeaddedorlostateachstepinservicedeliveryInacompetitivemarket,higherfinancialpricesmustbejustifiedby:

morebenefitsand/orbetterqualityofbenefitsand/orlowertime,effort,andsensorycosts,UnderstandingtheCustomerExperience:

FlowchartingaHotelVisit,Customer,Actions,EmployeeActionsFace-to-face,Frontstage,PhoneContact,Backstage,Make,reservation,Rep.records,confirms,Arrive,Check-in,atreception,Doormangreets,valettakescar,Enterdata,ValetParksCar,MakeupRoom,Registerguestdata,Receptionistverifies,giveskeytoroom,Gotoroom,Bellhopleadswaytoroomwithbag,IncreasingNetValuebyReducingNon-financialCostsofService,ConsidereachstepindeliveryofserviceReducetimecostsofserviceateachstepwherecustomerseespassageoftimeasaburdenMinimizeunwantedpsychologicalcostsofserviceEliminateunwantedphysicalcostsofserviceDecreaseunpleasantsensorycostsofservice,3,Successfactorsinservice-drivenbusinessesCreatingvalueforcustomersthroughserviceTheFlowerofService:

coreandsupplementaryelementsCustomerloyaltycreatesvalueforthefirmSomestrategiestoimprovesuccess,TwoDefinitionsofService,“Aserviceisanact,adeed,aperformance,ratherthananobjectorathing”LEONARDBERRY“Serviceisallactionsandreactionsthatcustomersperceivetheyhavepurchased”FEDERALEXPRESS,CoreProductsandSupplementaryServices,Mostfirmsoffercustomersapackageofbenefits:

coreproduct（agoodoraservice）supplementaryservicesthataddvalueInmatureindustries,coreproductsoftenbecomecommoditiesSupplementaryserviceshelptodifferentiatecoreproductsandcreatecompetitiveadvantageWell-designedsupplementaryservicesmay:

facilitateuseofcoreproductenhancecoreproductandaddbenefits,TheFlowerofService:

EightGroupsofSupplementaryServices,Core,Information,Consultation,Order-Taking,Hospitality,Payment,Billing,Exceptions,Safekeeping,Facilitating,Enhancing,KEY:

HowWell-ExecutedSupplementaryServicesAddValueforCustomers,EnablecustomerstoobtainmaximumbenefitsfromcoreproductAddnewbenefitsReduceunwantedcosts（e.g.timeandeffort）associatedwithpurchaseanduseofcoreproductMakeseller“easytodobusinesswith”Distinguishcoreproductfromcompetition,FacilitatingServices-Information,Core,Customersoftenrequireinformationabouthowtoobtainanduseaproductorservice.Theymayalsoneedremindersanddocumentation,FacilitatingServices-Order-Taking,Manygoodsandservicesmustbeorderedorreservedinadvance.Customersneedtoknowwhatisavailableandmaywanttosecurecommitmenttodelivery,Core,FacilitatingServices-Billing,“HowmuchdoIoweyou?

”Customersdeserveclear,accurateandintelligiblebillsandstatements,Core,FacilitatingServices-Payment,Core,Customersmaypayfasterandmorecheerfullyifyoumaketransactionssimpleandconvenientforthem,EnhancingServices-Consultation,Valuecanbeaddedtogoodsandservicesbyofferingadviceandconsultationthataretailoredtoeachcustomersneedsandsituation,Core,EnhancingServices-Hospitality,Customerswhoinvesttimeandeffortinvisitingabusinessandusingitsservicesdeservetobetreatedaswelcomeguests（afterall,marketinginvitedthemthere!

）,Core,EnhancingServices-Safekeeping,Customersprefernottoworryaboutthepersonalpossessionsthattheybringwiththemtoaservicesite.Theyalsoexpectfirmstohelpthemgainfulladvantagefromgoodsthattheypurchaseorrent.,Core,Safekeeping:

ExamplesofSupplementaryServicesforManufacturedGoods,CaringforcustomersnewpurchasesPackagingTransport,deliveryInstallationWorkunderwarrantyCaringforcustomersexistingpossessionsCleaning,trouble-shooting,repairUpgradesStorageDisposal,EnhancingServices-Exceptions,Customersappreciatesomeflexibilityinabusinesswhentheymakespecialrequests.Theyexpecthelpwhennoteverythinggoesaccordingtoplan,Core,OpportunitiestoUseInformationTechnology,Exceptions,Billing,Payment,InformationProcesses,Information,Consultation,Safekeeping,PhysicalProcesses,Order-Taking,Core,Hospitality,KeyRolesforITinDeliveringSupplementaryServices,SpeedprocessestosavecustomerstimePermitaccessfromanywhere（convenience）SimplifyprocessestoreducementaleffortFacilitateself-serviceLeverageemployeeknowledge,skillsRemembercustomerpreferencesReduceproblems,correctthemfasterStreamlinebillingandpaymentsystems,4,Successfactorsinservice-drivenbusinessesCreatingvalueforcustomersthroughserviceTheFlowerofService:

coreandsupplementaryelementsCustomerloyaltycreatesvalueforthefirmSomestrategiestoimprovesuccess,TheValueofaCustomer,“Thevalueofacustomerliesnotinthepurchasethathemakesatanygiventime,butinthethediscountedcashflowofallfuturepurchasesmadeduringhislifecycleasacustomer-ifheremainsloyal.Allthis,multipliedbythenumberoffriendstowhom,ifsatisfied,hemayrecommendtheproduct.”ERICMEYERLEntreprise,ProfitsGeneratedbyaLoyalCustomerIndustrialDistributionServices,Source:

ReichheldandSasser,ProfitsGeneratedbyaLoyalCustomerCreditCard,Source:

ReichheldandSasser,ProfitsGeneratedbyaLoyalCustomer:

CarMaintenanceandRepairServices,Source:

ReichheldandSasser,WhatMakesLoyalCustomersMoreProfitable?

TendtospendmoreasrelationshipdevelopsbusinesscustomersmaygrowlargermayconsolidatepurchasesfromonesupplierCostlesstoservelessneedforinformationandassistancemakefewermistakesRecommendationswinnewcustomersforfirm（actasunpaidsalespeople）Trustleadstowillingnesstopayregularpricesvs.shoppingfordiscounts,WhyCustomersAreMoreProfitableoverTime,Source:

ReichheldandSasser,CalculatingCustomerValue,ValueatAcquisitionrevenues（applicationfee+initialpurchase）lesscosts（marketing+creditcheck+accountsetup）AnnualValue（calculateeachyear）revenues（annualaccountfee+sales+servicefees+valueofreferrals）lesscosts（accountmanagement+costofsales+write-offs）,AreYOUloyal?

IfSo,Why?

Thinkofasmallbusiness,retailshop,orprofessionalofficethatyouhavepatronisedforsometime.Now,completethefollowingsentence:

“Istickwithmy-hairdresser/barber-drycleaner/laundry-servicegarage-accountantordentistbecause_”or“Ileftthemforanotherprovider,because.”,HowCustomersSeeRelationalBenefitsinServiceIndustries,Confidencebenefitslessriskofsomethinggoingwrong,lessanxietyabilityto