Capturing the Value of Supplementary Services
A brief note on Supplementary service verses standard service: The service as a product is essentially described as a package or bundle of different services, tangibles and intangibles, which all together form the total product. The package is divided into two main categories: the first one is the main service, which is called the ‘core service’ or ‘substantive service’. The other one is ‘auxiliary services’ or ‘extras’, which are often referred to as ‘peripherals’ or ‘peripheral services’.
These are also known as supplementary services. The core service is the basic value provided by the service product.It is the reason to purchase or consume services. This is the reason for which any company is in business too. Supplementary services are those that facilitate and enhance use of the core services. These are services other than core that companies offer to their customers to give additional value to their products or to encourage customer loyalty. Flexible Services Offering: It has been observed through research that most suppliers typically provide customers with more services than they want or need at prices that often reflect neither the value of those services to customers nor the cost of providing them.Too many times the manufactures continue to let sales people give away whatever services they think it will take to land a deal, even if those freebies dramatically reduce the profitability of business. To overcome the cost associated with the above issues, the author has suggested the ‘flexible service offering’ model to enable manufacturing and service companies reduce the number and cost of services they use to augment their core products.This approach enables the company to identify a naked solution or a naked system (which is the bare-bones-minimum number of services uniformly valued by all customers in a given segment at the lowest possible price that yield a profit). These naked solutions are then wrapped with options – particular services valued by individual customers within the segment. The steps to achieve flexible service offering are, ? Understand the supplementary services portfolio.If the company compiles the complete inventory of supplementary service, then it can assess the value of each service and the cost of providing it. ? Assess the value of the service rather than just measuring the customer satisfaction. Results indicate that while customers determine their re-purchase intention based on both core and supplementary service quality, mediated by value and satisfaction there is a direct and positive relationship of involvement between customer satisfaction and value of supplementary service provided. Extend the activity-based-costing technique to supplementary services as well. If the manufacture can break down costs on segment-to-segment and customer-to-customer basis, then it is viable to determine the value/price of the service being offered. This helps industries to target those market segments where their products or services provided the greatest value to customers and thus held the greatest potential for profit. Identify the existing standard services that can be done away with or specialized services that can be part of standardized services.Identify the existing optional services that can be discontinued. The benchmark here is simple: if the cost of the optional service exceeds the customers’ willingness to pay for it, the service should be discontinued. ? Apart from identifying the standard or optional services, to stay ahead in competition a manufacture has to continually innovate and produce new value added services. *For example in a survey taken by Hong Kong mobile phone industry to gauge the benefits of the supplementary services among the customers, it was reveled that the only one of the supplementary services (both optional and standard like pricing policy, staff assistance, customer service and transmission quality and network coverage) factor in the satisfaction determinants among the mobile phone users.The results suggest that network providers should focus more on transmission quality and network coverage as the core attributes of their service offerings and formulate appropriate ricing policy, rather than competing or focusing more on supplementary services like varied customer services. Benefits: When the supplementary services are offered with all the above attributes discussed in the flexible services offering section, there are lot many benefits the service providers gain and it also establishes the fact that trimming the supplementary services to what is required and beneficial to the manufacturer has benefits that far outweigh the benefits of keeping all the supplementary services just so as to satisfy the customer and keep the market share.Flexible service offering provides suppliers with a powerful means of retaining and expanding business with their most valuable customers. ? Helps customize the packages of products and services to meet more precisely the requirements of its spectrum of customers. ? Enables managers to be more adaptive and responsive in their pricing. ? Flexible service offering helps companies to revamp their sales force philosophies and practices. More control is given in the hands of the sales team there by enabling sales team to be more persuasive in explaining the value of services to the customers. #Case Study: Credit Card Marketing in Indian Industry The case study below deals with managing perceived risk for credit card purchase through supplementary services. Supplementary services can play a significant role in controlling functional and psychological perceived risk associated with credit card services. Marketers of credit cards can enhance the value of services to customers and can thus enhance purchase possibilities by reducing perceived risk through supplementary services that are controllable.Perceived risk is defined as the uncertainty that consumers face when they cannot foresee the consequences of their purchase decisions. The supplementary services recognized in this case were, ? ATM access, cash advance, and cash withdrawal and other facilities to meet financial requirements effectively. ? ATM access, cash advance, and cash withdrawal facilities with credit card. ? Through add-on card other family members can also use the credit card. ? Buying airline/railway tickets by using credit card at special counters save time. Additional facilities with credit card increase its usage value. In a study done by the author (Dr. Anita Goyal), it was revealed that 79. 26% agree with the idea that supplementary services provide operational value. It was also inferred that there were significant differences in the frequency of perceptions towards the statements indicating the functional utility of supplementary services available with credit cards. 70. 64% agree that supplementary services with credit cards help them to take care of psychological risk.There is a favorable perception of supplementary services in controlling the psychological risk. Respondents feel mental satisfaction to have supplementary services with credit cards. Thus, consumers while deciding for a credit card purchase consider facilitating services and supplementary services as significant in providing help to consumers for pre-purchase evaluation of credit cards and to make credit card purchase decisions in the Indian environment.References: 1. * Customer Satisfaction in the Hong Kong Mobile Phone Industry. – Service Industries Journal; Jul99, Vol. 19 Issue 3, p162-174, 13p, 3 charts http://search. ebscohost. com/login. aspx? direct=true&db=bth&AN=2514451&site=ehost-live 2. ## Managing perceived risk for credit card purchase through supplementary services. – Journal of Financial Services Marketing; Mar2008, Vol. 12 Issue 4, p331-345, 15p, 6 charts. http://search. ebscohost. com/login. aspx? direct=true&db=bth&AN=31227169&site=ehost-live