Archives for posts with tag: Service Delivery

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 businesssolutions1168@gmail.com

 

 

by Merlin Hernandez 

Companies today battle for a share of the market in a theater that is fiercely competitive. It has been described as a bloody red ocean of sharks and victims primarily because industries continue to strategize within a defined economic structure that is dictated by existing demand. But with supply outstripping demand in some industries, the marketing edge of differentiating strategies is quickly diffused in an information-driven culture, with the cost of competing eroding margins, and companies needing to look at new opportunities for profitability and growth. 

A divergent strategy will serve to insulate a business from competition by establishing itself in an untapped market with high opportunity for growth without threatening the immediate interests of competitors. It is a strategy meant to extend the time frame between market entry and competitor alert while concentrating on consolidating brand loyalty through value creation. This undermines the traditional approach to business by denying competitiveness as the key to success to pursue unlimited market opportunity through a leap in value creation for a different kind of demand orientation – a Blue Ocean Strategy (BOS). 

The fashion industry is intensely red ocean. But many high-end designers like Ralph Lauren, Versace, Stella McCartney, and Michael Kors have taken the best features of haute couture to offer a classic look at lower prices. It is a tactic that spans strategic groups – haute couture and mass market – to create Designer Retail as a whole new market segment to draw new customers to their brands and be less vulnerable to the competitive red ocean. Customers buy luxury and brand name (added values) at affordable prices. In other words, lowering costs and maximizing value. 

There is considerable evidence in the fashion industry where BOS has proven to be successful but with a twist. Instead of decreasing costs and lowering prices to differentiate the basic product, many designers have used a line extension RTM. Some of the literature claims that line extension is not aligned with BOS because it remains a strategy to compete for market share and only reinforces red ocean values. I tend to disagree because the line extension strategies used by these designers are specifically directed at unlocking the blue ocean by bringing previously untapped customers into the revenue stream. It does not differentiate the basic product to target the same red ocean market, there is a whole new product mix aimed at a target that is outside of the basic client profile. 

The approach splits the market into two separate targets – expensive high-end/low volume and low-cost mass market/high volume – with two separate and distinct product mixes. Companies maintain their brand identity as a high-end label and use that equity for value creation with a BOS strategy of low-cost luxury to reach into the mass market for volume output and higher profit margins. 

Apple has also embraced superior value creation through service delivery. In the face of intense competition, and similar products on the market before the company can achieve its full market projections, Apple has shifted its short to medium term emphasis from value innovation as its differentiation strategy to heightened value-creation as a way of getting one leg out of the competitive bloodbath (red ocean). This can be seen as a strategic re-alignment in an attempt to balance the components of value by measuring its economic and financial impact with both qualitative (value) and quantitative (financial metrics) tools for strategic and economic control. It is a methodology based on the integration of the investment curve for innovation, the value of the market generated by these investments, and the value-price ratio that impacts the company’s market position.  

 

“Given the expectation that competitors will quickly develop similar products and threaten the investment curve, companies like Apple need to push the life cycle boundaries as far as possible by ratcheting up the value-creation – not based on product improvement at additional R&D outlay but on the level and quality of service. It is a strategy of great market value that brings a new opportunity to take the product into the blue ocean. It will serve the function of buying time to cover capital investment, keep the share price steady, and have the surplus for the next wave of innovation” (The New Apple, Hernandez, 2012). Note the imminent arrival of I-Phone 5. 

Apple is currently operating in the blue ocean with the iPhone by creating new buyer value. “This is the mature phase of the smart phone life cycle where declining revenues and decreasing customer loyalty are to be expected along with and sharpened competitive tactics” (Apple and Samsung, Hernandez, 2012). Apple has actually opted out of the intense competitive red ocean strategies of increased marketing and branding spend, drastic cost cuts to increase margins, and price wars. Instead, Apple has re-defined its value map to offer a superior service product to sail the blue ocean. The brand loyalty generated might just carry the company through several cycles of competitor innovation. 

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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 businesssolutions1168@gmail.com