Competitive Differentiation through Service Management

Competitive Differentiation through Service Management
The significance of excellence in after-sales services is growing rapidly. Organizations, irrespective of industry, are realizing that traditional approaches and platforms can no longer guarantee global recognition.

Traditional focus has been on core products and sales. Most manufacturers are still viewing their service operations as a subsidiary function devoid of strategic importance. However, for others, the past decade has witnessed a remarkable change. Organizations are now moving away from the shortsighted sales perspective to achieve service excellence.

In fact, the trend in most manufacturing companies is changing prominently. Substantial profits depend on the level of service offering and not just the quality of product packaging. In another study by Accenture, results highlighted that poor service is the primary reason why customers switch providers.

While sale is important, service functions are elementary for optimizing customer satisfaction and retaining customer loyalty. While competitors can replicate product features quite easily, it is service that acts as the key market differentiator in many cases. Besides, it is an independent source of revenue generation. According to Deloitte Development LLC, service operations can result in more than 75% higher profitability than the overall profitability of a given business unit.

The expectations out of service offerings are moving from cost reduction to customer redemption. Therefore, it is important for firms to customize service offerings for rapidly evolving customer expectations.

Customers look for value and purchase only after thorough comparison with what the competitor has to offer. Given that scenario, it is critical to package the product with a service value that can enable customer satisfaction and retention.

An extended warranty is an integral service function referred to as “service agreement” or “maintenance agreement”, which is offered to customers in addition to the standard warranty. Generally, warranty covers mechanical failure incurred through normal usage and not accidents. Extended warranties cost additional, usually a certain percentage of the product’s retail price.

Value of the extended warranty

There are several reasons why consumers look for extended warranty on automobiles, for example. It ensures that your car will be in the best mechanical condition relatively longer. With the level of complexity in auto repairs today, one repair alone can be significantly expensive. It pays to invest in extended warranty, which costs lesser than the service charge, and covers all the repairs within a given period after purchase.

The company behind the warranty

An extended warranty is often backed by a third-party company or the manufacturer. Third-party warranties are often scored high for the ease of use. Most often, they are less expensive and offer broader coverage than what the manufacturer may be able to provide.

Understanding the challenges

A study by Deloitte shows while organizations plan and strategize to improve business results, service functions are often considered as afterthought due to the unpredictable challenges that can hamper results. Challenges that continue to plague service operations include: flawed strategy, business design, and operational discrepancies.

Due to a lack of insight into profitable service functions, organizations stumble in the attempt of overcoming competition. Very few of them have clear understanding about customer profitability and long-term benefits. Research suggests that less than 40% of companies have clear visibility into profitability through service.

According to a report from the Aberdeen Group, titled “State of Service Management 2011: Achieving Connectivity and Growing Revenue”, chief service officers (CSOs) are struggling to develop their service enterprises into core profit centers.

Service leaders have to keep trying new strategies to optimize benefits from revenue while improving customer satisfaction simultaneously.

Irrespective of their position in the service cycle, organizations need to take crucial steps in developing effective service offerings. They need to do that while keeping in mind the challenges that can impede results. The unpredictability and complexity of service models can diminish customer satisfaction and hamper outcomes. One of the biggest challenges in service operations is that some areas may have highly automated service-management capabilities, while other areas may not. It is hence crucial to integrate service-related processes with business functions, workflows, and systems. This reduces the element of ambiguity and ensures profitable business actions across functions.

With a set course of actions and clear objectives, it is easier to monitor the service transformation lifecycle.

Creating a niche

The way to create a niche in the market is through innovative and robust solutions. They often create a competitive differentiation against three elementary parameters: quality, cost, and timeliness. They serve as a benchmark to arrive at the best outcome in the market. Quality, cost, and timeliness ultimately drive the future of the offering.

While creating a competitive edge, it is also important to:
  • Explore different platforms
  • Seek new mediums for competitive advantage 
  • Adopt innovative service solutions that surprise and delight customers
  • Discover the right channels and develop the right metrics for evaluation and comprehensive process enhancement 
Service operations are critical in driving performance, building revenue, and developing strategic business advantage. It is evolving as a more stable source of revenue. It is hence crucial for organizations to explore more and more innovative and value-driven approaches to optimize profitability through service functions.

Author Bio: Preethi Vagadia is the Marketing Executive worked in process improvement projects involving the multi-national teams for one of the best companies based across the world. She has over 5 years of experience in Warranty management solution, and as a practicing manager of Business analysts successfully executing several projects in terms of Logistics management, Logistics Integration, Reverse logistics, Warranty software and Warranty claims management.
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