CAPTURING VALUE OF

SUPPLEMENTARY SERVICES
GROUP - I

Roll Nos.
801, 802, 803, 804, 806,
807, 808, 810, 812, 814,
815, 817, 823, 824
THINKING ABOUT VALUE
 Value is the worth in monetary terms of the net
economic, technical, service, and social benefits a
customer receives in exchange for the price it pays for a
market offering.

In general, customer firms pay price now and

gain value later.
PLANNING AND CREATING SERVICES
 A service product comprises all elements of service
performance, both tangible and intangible, that create
value for customers

 The service concept is represented by:

 A core
product
 Accompanied by supplementary services
AUGMENTING THE CORE PRODUCT
DESIGNING A SERVICE CONCEPT
 Core Product
 Central component that supplies the principal, problem-
solving benefits customers seek

 Supplementary Services
 Augment the core product, facilitating its use and enhancing
its value and appeal

 Delivery Processes
 Used to deliver both the core product and each of the
supplementary services
AUGMENTING THE CORE PRODUCT
 Are supplementary services needed to facilitate use of
core product or simply to add extra appeal?

 Should customers be charged separately for each service

element?

 Or should all elements be bundled at a single price?

CONTD…
Which supplementary services should be
offered as a standard package accompanying
the core

Which supplementary elements could be

offered as options for an extra charge
 Add ons and giveaways do not increase profits instead
they only offer flexibility to a service portfolio
 Customization is the key to wining
 To achieve customization manufacturers have

A) installed flexible manufacturing systems

B) created modular components that can be assembled in

a variety of ways/configurations
COMMON MISTAKES MOST MANAGERS
MAKE

 Focus on products and not other elements

This leads to huge impacts on costs and profits.
 They add layers to existing services

Thus costlier services but no value to customers

 For example:

freebies reduce profit

 Some of the companies are
 decreasing cost of providing services
 using services more effectively
 Getting more out of business and enhancing profits
 Thereby giving off less freebies but still are reaping
profits
 Each customer is different- One size does not fits all

SO WHAT SHOULD THE MODEL

BE???

 The answer lies in “flexibility in your portfolio”

 STEPS TO ENHANCE THE VALUE OF
SUPPLEMENTARY SERVICES
GETTING STARTED
 Company should turn its services to flexible offerings

Mistakes in the process

 same product/ services in all the segments
 Too much focus on the product and core services

 No focus on the supplementary services

 Sales people often offer optional supplementary services

 Not able to bifurcate between standard and optional

ASSESSING VALUE
 Companies rely solely on customer satisfaction instead
of assessing the value of their services

ASSESSING COSTS
 Activity based costing

 Difficulty in tracking which customer got what service

and allocating related costs
 Companies are organized around products rather than
around market segments or custoomers
FORMULATING FLEXIBLE SERVICE OFFERINGS
1) Existing standard services
Limiting the standard package to just the services which
are valued by all customers
Reduce the cost of providing services at a level below the
competition’s without perceiving the value to the customers
Suppliers are far more reluctant to eliminate existing
services than to add new ones
If the buyer buys minimum amount of Co’s products, it
receives “basic ” level of services. If higher the buyer wants
a higher level of services, it can pay extra.
2)Existing Optional Services
 Cost of an optional service exceeds customers’
willingness to pay for it, the service should be
discontinued.
 Changes in technology, required expertise or insurance
risks can eliminate the value of optional services.
 Suppliers can help the customers that still need those
services to obtain them from other companies
 Certain companies chose to retain services as options
and had interesting reasons to do so.
3) ADD NEW SERVICES
 Shrewd customers add new services to standard
offerings to thwart the competition
Example: Baxter Scientific Products
Customers have to choose from two options:
1. If the competitors do not offer the service, Baxter
offered extra unique services
2. If the competitors provide the same service then they
had to bear the pain of trial and tribulations.
 Sometimes adding new optional services involve
offering new levels of an existing standard service.
PRICING THE OFFERINGS
 Flexible service offerings enable managers to be more
adaptive and responsive in their pricing
 When enhancing the standard offerings with additional
services managers have several choices:
1. Raise the price by an amount equal to the cost of
providing the service
2. Raise it less than the cost of providing service

3. Raise it slightly higher to camouflage a price increase

CREATING VALUE MERCHANTS
 Company requires the costs like training, support and
application assistance to be obtained from someone else’s
pocket in the following ways:
1. Charging customers for problem solving provided that the
customers are guilty
2. Functional areas within the Automation group

3. Against substantial warranty work

 Work towards training salespeople in being more
persuasive.
 Sales representatives can assemble tailored packages of
products and services.
CONCLUSION
 Following this Model , might require developing the
ability to say no to customers wanting full service
packages at no frills prices

 If practiced deftly the implementation of flexible service

offerings will give a company the reputation of being
firm, consistent and fair over a period of time.
THANK YOU!!!