• Services Differentiation

• Services Differentiation

In addition to differentiating its physical product, the firm can also differentiate the services that accompany the produet. Some companies gain competitive advantage through speedy, reliable or careful delivery. Harrods, the luxury retailer, delivers In addition to differentiating its physical product, the firm can also differentiate the services that accompany the produet. Some companies gain competitive advantage through speedy, reliable or careful delivery. Harrods, the luxury retailer, delivers

30 minutes or reduces the price. Installation can also differentiate one company from another, IBM, for' example, is known for its quality installation service. It delivers all pieces ol purchased equipment to the site at one time, rather than sending individual components to sit mid wait for others to arrive. And when asked to movt IBM equipment and install it in another location, IBM often moves competitors' equip­ ment as well. Companies can further distinguish themselves through their repair

services. Many a car buyer would gladly pay a little more and travel a little further to buy a car from a dealer that provides top­notch repair service.

Some companies differentiate their offers by providing a customer training service. For instance, General Electric not only sells and installs expensive X­ray equipment in hospitals, but also trains the hospital employees who will use the equipment. Other companies offer free or paid consulting services ­ data, infor­

mation systems and advice services that buyers need. For example, reinsurance company M & G provides information and advice to its customers. It also provides specialist help in developing new products.

Companies can find many other ways to add value through differentiated services. In fact, they can choose from a virtually unlimited number of specific services and benefits through which to differentiate themselves from tlie compe­ tition. Milliken & Company provides one of the best examples of a company that

has gained competitive advantage through superior service:

Milliken sells shop towels to industrial launderers who rent them to factories. These towels are physically similar to competitors' towels. Yet J Milliken charges a higher price for its towels and enjoys the leading

market share. How can it charge more for essentially a commodity? The answer is that Milliken continuously 'decommoditizes' this product through continuous service enhancement for its launderer customers. Milliken trains its customers' salespeople; supplies prospect leads and sales promotional material to them; supplies on­line computer order entry and freight optimization systems; carries on marketing research for customers; sponsors quality improvement workshops; and lends its salespeople to work with customers on Customer Action Teams. Launderers are more than willing to buy Milliken shop towels and pay a price premium because the extra semces improve their profitability, 9

Speed of service is a competitive advantage used by many firms. Fast food is now common on the world's high streets and malls, along with semces like one­ hour photo processing and Vision Express's one­hour service for spectacles. These services provide a direct benefit to customers by giving rapid gratification and allowing services to be completed within one shopping trip. Speed also helps sell more expensive goods. Abbey National found that its success in providing large mortgages depended upon how fast it could confirm that it would give a person a home loan. It responded by allowing local managers to make loan de­ cisions rather than processing applications centrally. In the car market Toyota's two­day policy means that it can supply a well­equipped Lexus within two days, while many other luxury car makers expect prospects to wait several weeks for custom­built cars.

The success of courier services like TNT and DHL shows that many people are willing to pay extra for a quick, secure service. A study of the importance of service responsiveness to users of small business­computer­based systems shows how speed is valued:

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• Eighty­five per cent of users were willing to pay a 10 per cent premium price for same­day service; 60 per cent would pay 20 per cent more; and 40 per cent would pay a 30 per cent premium.

• On average, same­day service was worth twice as much as brand name and distributor reputation, and worth four times more than technical features. 10