The Challenges of Surrounding Products with Services
Recently, I had the opportunity to work with a manufacturing client that was part of a relatively compact industry, one that basically had four major players along with a few niche specialists. What was remarkable was that most customers were extremely loyal to one of these four competitors. Only about one-fourth of the customers regularly considered more than one of the four brands when making a purchase. The others were regular, repeat customers buying the products of their preferred manufacturer.
As part of the work with this client, interviews were conducted with a substantial number of the customers in this market, including ones that preferred each of the four manufacturers and ones that were in the “willing to switch” category. Among the product loyalists, clear reasons were given as to the basis for they loyalty. Among those that considered more than one brand, there was clarity as to what drove their final decision.
What was remarkable about the messages as to what had created loyalty and what drove choices was that both were centered on services. When “product” came up, the message was basically that all four of the major firms in the industry were “pretty comparable” and “had good products and a good product line.” When “price” came up, the message was basically that “the industry was competitive, and you could count on getting a fair, competitive price.” However, when “services” were discussed, the communications often became passionate and customers underscored the importance that they gave to the services that surrounded the products that they were buying.
Educator Jerry Fritz has been quoted as saying “You’ll never have a product or price advantage again. They can be easily duplicated, but a strong customer service culture can’t be copied.” Author Tony Alessandra similarly says “Being on par in terms of price and quality only gets you into the game. Service wins the game.” It’s probably far too early to dismiss the advantages of a superior product or a better price point – the success of Apple and Southwest Airlines, among others, motivates that conclusion. But the case study I provided above and numerous other examples certainly support agreement with the importance of developing a strong service culture.
Building strong service competencies challenges most manufacturing firms and requires active leadership involvement. Services are different, along multiple dimensions. They are unpredictable, with requests arising at unexpected times and usually involving a high degree of urgency. They draw upon company resources that probably have a “full-time day job” that isn’t centered on customer support. They are ill-structured, with customers often unable to define their needs clearly, sometimes only able to communicate that they have a problem requiring attention. They frequently require 24/7 resources and processes. They are unbounded, with many service requests having little (and sometimes nothing) to do with the products made by the company.
And, as the interview findings that I summarized at the start of this article suggested, they are frequently so important to the customer that they create long-lasting memories that shape, for better or worse, the customer’s impression of the company and their willingness to do business with it. That reason alone, in addition to the significant difference between service delivery and traditional manufacturing-related activities, calls for active leadership involvement. Three leadership actions can contribute to your firm’s success in successfully surrounding your products with services that are valued by your customers and that enhance your firm’s competitive standing.
First on the list is selling the idea throughout the organization. Research into the challenges of changing a firm’s business model concludes that the two most frequent causes of failure are “internal resistance to the new business model” and “implementation process was poorly managed.” Making services an important part of your firm’s offer is a major change to most manufacturer’s business model. The concept has to be sold, over, and over again.
Second is avoiding failure that results from “ridiculous resourcing decisions.” More than in any other business function, I’ve seen under-resourcing of service delivery by such a substantial margin that failure should have been easily predicted. Give the team a chance to succeed by providing the right level of resources and the right competencies. This is especially true of existing business units that are being asked to add service to its roster of responsibilities.
Third, establish clear performance metrics for service, measure it carefully, and ensure that attainment of goals is of consequence throughout the organization. Remember, “if it isn’t measured, it doesn’t matter.”
Service can become an important means by which manufacturing firms create value for customers and capture it for its shareholders. However, service success stories don’t come easily and usually only emerge in firms where there is active leadership attention to the task of creating a strong service culture within the firm.
Author: George F. Brown, Jr.
 George F. Brown, Jr., You Know It Ain’t Easy, Business Excellence, September 2011.