Archives for posts with tag: Service as Commodity

by Merlin Hernandez

Consumers today want a more seamless delivery interface, a more personalized and simplified process, and a valued-customer experience but most of all they want it quickly. According to a Cisco Customer Experience Report, the most important attributes in the consumer interface are access/availability of the desired product or service, knowledge and competence in delivery, and efficiency in meeting their individual needs. In this mix what a business needs to survive the far-reaching changes in the contemporary consumer culture is a more specifically customer service orientation for a more satisfied and loyal customer.

Contemporary market leaders typically have narrowed their business focus to deliver superior customer value in one of the three value disciplines – cost leadership (best prices), product leadership (highest quality), customer intimacy (most responsive service culture) – while maintaining industry standards in the other two. Companies like FedEx and Home Depot that outstrip the competition in terms of profitability tend to excel in more than one value discipline. A firm’s relative position within an industry is given by the type(s) of value discipline chosen for competitive advantage e.g. cost leadership vs customer intimacy. Dual value disciplines as the strategic focus for a service business can become the basis of sustained market leadership. But for a small business especially a start up operating in the service sector, cost and product leadership within limited resource capabilities may not be possible. There can thus be no compromise on the customer focus.

What does this say about the business of service in the SME sector? In a nutshell, a service experience that is so remarkable that it stands out from the competition. But even more important, it is burned into the memory of the customer. The service business, by its very nature, is one of fulfilling customer expectation which intrinsically entails a value discipline of customer intimacy. The emphasis is on attention to customer detail and customer service, customization, CRM efficiencies, surpassing customer expectations, timely delivery, reliability, and lifetime value. But the same can be said for a consumer product. Companies like Apple and Nike have so surpassed industry standards as to have raised customer expectations with superior products that set a higher standard which competitors are not easily able to reach. This requires intimate and detailed customer knowledge with the kind of operational flexibility that allows fast response to changing customer needs and preferences.

Small businesses are at a distinct advantage for that kind of flexibility and intimate relationships. They are not structurally distant from the customer and bogged down by multi-tiered delivery systems and processes. In factoring customer needs into the strategic mix, businesses need to identify value-creating strategies that are most appropriate. The target market remains the most influential stakeholder around which to structure a business, and customers buy value. Market leaders are adept at understanding the value drivers that motivate their customer base. And small businesses remain closer to the ground. This does not mean that there is no need for rigorous market assessment before embarking on a small business venture. But shaping the service to more closely fit customer need brands the business as customer-focused and builds customer loyalty.

Assessment of the target market, however, should present a customer that would be more interested in a best total solution that meets their needs where quality delivery is the primary consideration. A business servicing this market segment needs to be immersed in continuous delivery process innovation and improvement to both satisfy and anticipate customer needs. This would reflect the value discipline of customer intimacy which places a stronger emphasis on more esoteric and long-lasting value e.g. organic food and good health, hypo-allergenic natural cosmetics, recycled gift paper and cards, customized cooking oils or jams natural raw materials, locally grown, chemical-free, non-GMO product etc. Value here is described as relevancy and engagement in response to long term need and wider societal benefit. Strong value added strategies and deeper customer relationships might be critical for a new small business. It can bring the solid market differentiation that gives the new business the lead time for developing brand awareness and customer loyalty. This will consolidate the market presence and establish a customer base before the competition comes knocking.

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Merlin Hernandez is an entrepreneurial development and management consultant who operates mainly in the small and medium enterprise sector. For more information on this and other topics, please send enquiries to




by Merlin Hernandez


Innovation in communication technology and the Information Age have shifted the face of marketing from an emphasis on product placement to a to a heightened customer orientation. The traditional production concept of mass production and distribution, high inventories and high risk is giving way to customization and customer empowerment where the customer is seen as a partner to product development and production processes. This allows manufacturers to be more responsive to customer need, carry less inventory, and minimize surplus and waste.

The ease of Internet comparisons has led to a more savvy buyer with greater price sensitivity and much less brand loyalty. Businesses have to do much more to gain and hold market share and maintain a customer base. Companies are now finding that the old production concept of production efficiency, low cost, and mass distribution needs more service and value overlays in order to maintain competitive advantage.

This has implications for the product concept itself. While performance and innovation remain key elements to success, the idea of relationship marketing has undermined the old notion that a good product will create its own market (the selling concept). This kind of orientation presupposes an aggressive approach to placing the product in the hands of the consumer, without factoring, in any meaningful way, the consumer perspective.

Business operations today however, seek to satisfy a broad base of stakeholders – suppliers, distributers, customers, shareholders – to the benefit of more long-term relationships and more holistic strategies for maximizing profits (the marketing concept). It is based on delivery efficiencies that include product quality, performance, innovation, availability, price, service, and intangible value through added value creation. This may include a unique service culture, new uses for the product, or new technological integration and applications for expanded product usage.

The selling concept epitomizes a philosophy of selling what is made rather that making what the market needs. In the contemporary business environment, success will of necessity need to be aligned with a marketing culture that places the customer at the center. As the heightened competition inherent in globalization offers multiple options and greater capacity for comparison to consumers, businesses need to offer more than just a well-made product.

Products will need to resonate more specifically with customer need, fit into their lifestyles and aspirations, and provide some intrinsic value that extends beyond the product – enhanced social status, group leadership, luxury etc. The selling concept has shifted to more of a marketing concept which requires sound research into what customers want and need, at a price they can afford, and the most efficient methods of getting it to them. Businesses need to be market-driven with customer satisfaction as the primary focus.

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Service as Commodity

Merlin Hernandez is an entrepreneurial development and management consultant who operates mainly in the small and medium enterprise sector. For more information on this and other topics, please send enquiries to


by Merlin Hernandez


Businesses depend on customer satisfaction to meet their strategic goals, and the service design matrix would be of maximum importance as long as it conforms to the needs of the market. One of the more common value creation strategies in recent times is the integration of end users, retailers, vendors, and marketing in strategic partnerships to leverage competitiveness. The strategy blurs the lines of separation among manufacturer, supplier, retailer, and customer through intensive market research, stakeholder participation, and integrative technology to develop a product more acutely suited to market needs. Tangible products then become vehicles for service provision, and service itself becomes the underlying commodity. 

This is especially true in the service industry. The service design matrix is the configuration of technology and organizational networks coming together to satisfy the needs, wants, and aspirations of customers through the quality of delivery. The nature of service delivery is, by definition, one of managing consumer expectations. The symbiotic relationship between service and consumer dictates that the service only has value if it meets the customer need for high quality delivery that satisfies its purpose. It is a relationship where service and consumer exist on a continuum and the service is only produced if it is, at the same time, consumed by the customer e.g. a restaurant meal only exists as a product at the point of consumption – it has no shelf life and cannot be shipped. The experience of the meal remains specific to the moment. 

Of great significance is the relationship between the service systems of the operation and marketing opportunities. Service organizations rely on this service design matrix to gain competitive advantage in the marketspace. Firms need to align their services with the market environment, taking competitive intensity into consideration in order to meet a delivery imperative that increasingly demands service as value-creation. Service systems form part of the value proposition in the transactional relationship between provider and client. There has to be an emphasis on weaving all elements of the service product into customer-based solutions and benefits where service becomes the common denominator of all business exchange systems and processes. 

Each time the service is rendered, it seeks to fulfill a specific range of client expectations that may not be transferable to another client. This makes customer the premier focus of the service design matrix with service delivery options that are flexible, permeable, and highly reactive i.e. characteristics of workers, operations, and innovations must be relative to the degree of customer/service contact, remain clear and self-evident for appropriate application, and is structured to react effectively to changing customer needs and worker requirements. All points in the product-service continuum are designed to dovetail into customer satisfaction 

Close proximity of business functions is another strategy that facilitates tighter control and easier coordination for quick decision-making and response to market information. Additionally, the use of communication technology like MIS systems readily synthesizes vast amounts of information to ensure that the product/service matrix is closely tethered to customer service needs – exploiting trends, product variety, speed to market, accessibility, competitive pricing, good quality etc.