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B2B Business Services: Mapping the Customer Chain
In the B2B business services world, change is common. Markets experience change in the form of consolidation, global expansion, technology migration, and a multitude of other reasons. These drivers present service businesses with the reality of having to adjust their role. In order to continue driving profitable growth, it is necessary for businesses to understand and evolve their role within the market. By studying and mapping the customer chains that exist in its market, a service business can discover new ways to add value and grow.
Locating Unmet Needs through the Customer Chain
Depending on the market, customer chains vary from a straight line to a complex web of different channel partners, integrators, intermediaries, and other value-added players. Customer chains for a service business differ from those in business products (e.g., raw materials, intermediaries, and other goods used by end customers).
Figure 1 details a customer chain in the automotive manufacturing sector. This chain illustrates the contrasting positions held by product-based and service-based companies. Product flows laterally from suppliers who provide input to end customers who end up buying automobiles. Meanwhile, service businesses, like logistics providers and 3PL/brokers, are situated “on top” of the customer chain. These service businesses aren’t directly involved in the flow of product; instead, they provide value to players such as tier 1 suppliers in the form of supply chain management services—trucking, transportation management, warehousing, and distribution management.
Figure 1: Logistics provider customer chain overlaid on automotive supplier customer chain
Mapping the customer chain allows those in business services to better locate unmet needs and inefficiencies in the market. For example, as shown in Figure 2, a logistics provider recognized an opportunity to develop stronger relationships with automotive OEMs they ship to on behalf of tier 1 suppliers. The logistics provider approached OEMs with solutions to address their needs, such as improved supply chain efficiency. By implementing customized inbound logistics, delivery times were reduced between the tier 1 suppliers and OEMs. Thus, the logistics provider created value for its shipping customer, and received a new contract to deliver significantly higher volumes.
Figure 2: Identifying inefficiencies in the customer chain
Differentiating through the Customer Chain
The customer chain perspective can also help service businesses differentiate their offering. Let’s turn to a different business service in the construction space to show how customer chains can be utilized to identify opportunities for differentiation.
Figure 3 shows the customer chain for an Engineering, Procurement, and Construction (EPC) firm serving the higher education market. EPC firms are responsible for overseeing and executing major capital projects, such as the building of a stadium at a university. This customer chain ties together a vast array of players such as suppliers, general contractors, and other third-parties involved in delivering complex facilities to end customers. Though the EPC firm is not involved in the direct product flow—it falls to the general contractor and its sub-contractors to physically build the stadium—the firm provides essential value-added services such as project management, vendor contracting, and fielding end customer needs. Given the unique logistical requirements of these projects, EPC firms are also tasked with coordinating the activities of a variety of third-party consultants to help fulfill their responsibilities.
Figure 3: EPC higher education market customer chain
Figure 4 illustrates a value creation opportunity identified by an EPC firm when it added another layer of detail to its customer chain. The firm noticed unmet needs among a set of key influencers not usually considered in pursuing projects in the higher education market: university students, faculty, staff, and the wider community. While planning a project, the EPC firm sought to engage these stakeholders by soliciting design ideas from students, fielding and addressing community members’ concerns, and reordering construction processes to avoid interfering with the academic schedule.
Figure 4: In-depth mapping of the customer chain to identify underserved stakeholders
The EPC firm’s tailored approach generated increased support from local stakeholders—a fact that did not go unnoticed by the economic buyer. As a result, the firm managed to win a large stadium project with a university and secured two additional follow-up projects. In-depth mapping of the customer chain enabled the service business to recognize and deliver value to stakeholders that had previously been ignored. The differentiated service offering gave the EPC firm an edge over competitors in the higher education market.
Understanding each player along the customer chain—who they are, what they do, what they value, and what drives their purchase decisions—can be a source of valuable insights for companies in business services. We highlighted two cases where service businesses capitalized on the customer chain: a logistics provider that identified and addressed the needs of nontraditional channel partners, and an EPC firm that differentiated itself from the competition by customizing its service offering. These are just two examples of the myriad of benefits understanding customer chains can provide.
Customer chain mapping is the first step towards seizing growth opportunities. After locating where these opportunities exist, service businesses must then figure out how to create and capture value. Customers will only purchase services if they believe the added value will translate to success for them in the market, so it is essential that service businesses know which value levers to pull. Through our work in a variety of different industries, we have identified the fundamental ways service businesses can leverage customer chain insights and create value for their customers.