Combined effect of utility and warranty

Value creation is the combined effect of utility and warranty. Value for customers can be increased by either of the two factors. Both are necessary: neither is sufficient by itself. Each should be considered a separate factor of value creation (Figure 3.7).

The ability to deliver a certain level of warranty to customers by itself is a basis of competitive advantage for service provider s. This is particularly true where services are commoditized or standardized. In such cases, it is hard to differentiate value largely in terms of utility for customers. When customers have a choice between service providers whose services provide more or less the same utility but different levels of warranty, then they prefer the greater certainty in the support of business outcomes.

Figure 3.7 Combined effects of utility and warranty on customer assets

‘Fewest calls dropped on average’ is the value proposition of one major provider of mobile communication services expressed in its advertisements. An equally large competitor counteracts with the value proposition of best available coverage in the majority of urban areas. The other perpetual basis of differentiation is the number of calls made for a flat fee within peak hours of usage. This is an indirect measure of the capacity of over-subscribed service assets that service providers are assuring for the exclusive use of their customers. Of course, when competitive action leads to reduced differentiation based on warranty, service providers respond with service package s that offer additional utility, such the GPS navigation or wireless email on mobile phones.

Certain parcel delivery firms and retailers are market leaders in highly commoditized businesses simply because they offer a level of certainty unsurpassed by their peers. Their services guarantee delivery of goods on time regardless of location, time zone, or size of shipments. They are able to offer such warranties because they have developed certain service management capabilities and resources that instil a level of confidence in their operations.

Service providers should be able to develop such levels of confidence so they are able to support the business strategies of their customers. They add value to their customers by injecting this level of confidence in those strategies. Service providers emulate each other, leading to situations where providers offer similar levels of utility or warranty. Service providers must continually improve their value propositions to break away from the pack. The improvements can drive through one or more of the service management processes.

The guidance provided in the Service design, Service transition, and Service operation processes is useful in this strategic context. Service Design processes provide new and improved designs delivering better utility or better warranty. Service Transition processes ensure design improvements are directed into Service Operation while minimizing costs and risks. Service Operation processes inject the new value propositions into the customer’s business by delivering higher levels of utility and warranty. The processes of Continual Service Improvement coordinate the flow of knowledge between the processes and provide feedback throughout the lifecycle.

Case example 2 (solution): Warranty and utility

A casual observer may quip that both provide identical services: mobile communication services. However, by adopting a marketing mindset, each provider focuses on different aspects of customer outcomes or value creation.

The slogan ‘Can you hear me now?’ differentiates value based on a customer’s desire for warranty: service availability regardless of location.

The slogan ‘Fair and Flexible’ differentiates value based on a customer’s desire for utility: fair pricing under a variety of service usage scenarios

Дата добавления: 2015-11-14