The Service Infusion Continuum

From Products to Services and Solutions. Embracing Customer Centricity in B2B

Interview with Mary Jo Bitner and Stephen W. Brown, co-authors of the book “Profiting From Services and Solutions: What Product-Centric Firms Need to Know”. The interview was recorded in July, 2014, when the book first came out. To learn more about the Service Infusion Continuum framework introduced in the podcast, check out CSL webcast Profiting from Services and Solutions available on the CSL blog.

Podcast Transcript

This podcast was brought to you by the Center for Services Leadership, a ground-breaking research center in the W. P. Carey School of Business at Arizona State University. The Center for Services Leadership provides leading edge research and education in the science of service.

Darima Fotheringham: Today I’m joined by Professor Mary Jo Bitner, the Executive Director of the Center for Services Leadership at the W.P. Carey School of Business, Arizona State University, and with Emeritus Professor Steve Brown, Distinguished Faculty with the Center for Services Leadership and a Strategic Partner with the INSIGHT Group, a global services growth consulting firm.

Q: For those who may be new to the Center for Services Leadership, can you tell us a little bit about yourself and your coauthors?

Mary Jo Bitner: We represent a 4 member faculty team that wrote this book together. We worked together on the research and the writing of the book from the very start to finish. One of the foundations for the book is a major research project that we did with 5 Fortune 100 companies seeking to understand their challenges, their successes and insights as they moved from being product-centric to customer-centric and service-centric firms. It was a long project, over multiple years. The co-author team is Steve Brown and myself, also Valerie Zeithaml, who is a Marketing professor at University of North Carolina. She’s internationally known for her work in Service Quality and Customer Equity and also in the work that we did for the book. Steve Brown is an Emeritus Professor of Marketing at ASU. He founded and led the Center for Services Leadership for over 25 years. Now he’s a consultant, author and an executive teacher focusing on helping firms in this area. Jim Salas is the fourth author of the book. He’s an Assistant Professor of Marketing at Pepperdine and he recently graduated with his PhD and his dissertation work focused on strategies helping firms move into services. And then myself, Marketing Professor here at ASU and Executive Director of the CSL. We worked together as a team of four from the beginning to the end and are very excited to have our book out.

Q: What inspired you to write “Profiting from Services and Solutions: What Product-Centric Firms Need to Know?”

Steve Brown: There are several things. One, of course, is working with all the member companies of the Center for Services Leadership. Many of them, over the years, came to Mary Jo and myself and others and talked about how they, being very product-centric companies, wanted to grow into services and solutions. This is probably the biggest catalyst for the research project that underlies the book. We also knew that there was relatively little known about this topic except anecdotally. And what the book tries to do is study in depth these 5 companies but also integrate some of the latest literature on this topic and then feature several rich examples from companies that have either gone through this transition or are going through this transition right now.

Mary Jo Bitner: As Steve said, this was something that we were observing from our member companies but also in our work and travels around the world. We were seeing that this was really a global phenomenon and a lot of the challenges and issues and strategies that firms were approaching in this area were really happening all over the world. We could see that it was something that would be valuable to research and also to let companies know more about.

Q: In the very first pages of the book you talk about importance of adopting customer logic to be successful, especially in B2B services. Can you explain what it means and share an example?

Steve Brown: That’s a very good question. You know, we have learned that B2B product companies tend to be infatuated with their technology and their products and often have a very long standing engineering mindset. And a true customer-logic company is actually infatuated with their customers and they are even interested in how they can help their customers achieve their objectives, their outcomes and deliver value in some cases even to their customers. So for example key performance indicators of customers become as important in many cases as their own company’s KPIs. An example might be from General Electric who’s going through this transformation right now. GE has made locomotives for a long time but in recent years they’ve been deploying software, sensors attached to their products and also analytics to provide services and solutions. They’ve applied it very effectively with railroad on Norfolk Southern, which has been a customer of theirs for locomotives but now is using some of these new higher value services to help them better utilize the locomotives, keep the trains on the track longer, keep even maybe increases miles per hour in certain situations, while still maintaining the safety levels. GE report and Norfolk Southern report that they are saving the company over 300 million dollars a year already from this service GE is providing.

Q: In your book you introduce a concept of service infusion continuum. What does it mean?

Mary Jo Bitner: As we did this research, we developed what we called a service infusion continuum. It shows the different types of services that manufactures and technology companies and others offer to their customers and it’s a variety of different types of services. They start on the one side of the continuum with services and support of their own products. This is something that almost every manufacturer, every technology company does, things like warranties, repair and maintenance, customer service phone lines. Things that they need to do to be in business around their products. But we were seeing that companies were moving into a lot of other types of services. And that was really for the purposes of growing, profiting and building their business. As they moved across the continuum, those services increasingly became more complex and more sophisticated. They are moving in the direction of services that really support their customers now, not so much supporting the products, but services that support the customers themselves. As they move along that continuum and get all the way to the very end that’s where we talk about services and solutions that really do whatever is needed that the customer needs to solve their problem rather than services associated directly with the product.

Q: And as companies move into different services along the continuum, what are some of the challenges they need to tackle?

Mary Jo Bitner: As they move along the continuum, we found a number of challenges that they face and it’s interesting that we found that these were common challenges. It’s not unique to one company necessarily. As they move into these more sophisticated, more complex services they need to carry out new activities, develop new capabilities. For example, customers expect greater customization of the service as they move along that continuum. A warranty service doesn’t need to be all that customized, but a service that is supporting a customer solving a particular complex problem is probably going to be fairly customized to that customer. And the decision on how much to customize and how much to standardize is a key decision that companies make. They also find that they need new skills and capabilities as they move along the continuum, the type of sales people they need, the expertise that those sales people need to have in understanding customers and working directly with customers is much different from the types of skills they need to sell a warranty package or say repair and maintenance service. So capabilities, I think, was one of the really big challenges that many companies have, even when they recognize the capabilities they need, then finding the right people for those jobs can be very challenging. Also all around the structure of the company. How to structure the business in order to most effectively deliver these services, should they have a separate service unit? Or should they try to integrate these services across units or into existing parts of the organization? And again, a key question that we address in the book.

Steve Brown: What I think is interesting there too, Mary Jo, is that everything you cite is important enough that we feature on as a chapter in the book.

Mary Jo Bitner: And we find in the book, as Steve said, we have separate chapters on each of these topics and we look at the insights of these companies as well as some of the challenges. We look at the literature and other ways that they can solve these issues. A couple of the other big challenges are collaborating with customers as they move along the continuum. The companies find that they need to be much more collaborative with the customer in terms of designing the services itself, but then of course in delivering it and getting feedback on it and changing it; just a lot more direct collaboration with the customers, which some of them have not be involved in doing. Finally, one of the biggest challenges, often something that overrides many of the other ones, is the challenge of developing a service culture. A culture is really a mindset, and often these companies need to develop a new mindset that focuses on customers. Frequently, they have a very operations or product or engineering driven culture and this is a big shift for many of these companies.

Q: You name a number of areas that you really need to tackle to be successful, which can be an enormous task. How do you suggest that companies can prioritize if they can, and maybe share an example?

Steve Brown: Yes, that’s a good question Darima. It’s unlikely that any firm in this transformation is going to tackle all six of what we call “C”s in the book, simultaneously. Furthermore, for example, they may be farther along in the capabilities that Mary Jo discussed but way behind in terms of collaborating with customers. One of the factors that she discussed might be more important and need more immediate attention. All that being said, the real mega factor that Mary Jo alluded to is culture. I’ve seen some great company strategies to transform into services and solutions, yet too often those strategies fail because the company hasn’t addressed the necessary culture changes. A little phrase that we use in the book and I like to use with executive audiences is that culture will trump strategy every time. So companies devote a lot of attention to developing strategy to move across the continuum or grow services and solutions; but if they have overlooked or are dealing with a culture that they are also not willing to adjust, they are probably going to be disappointed in the results. An example of this comes from a global company based in Sweden called SKF which is a longstanding company manufacturer of bearings, not a very glamorous business. But if a bearing breaks, a production for chaos breaks out and millions of dollars could be at stake. Several years ago, the leaders of SKF recognized that a bearing was really a kind of commodity, and they decided to change their culture and to change their business. They broadened their capabilities by growing organically and also making some strategic acquisitions. They also dramatically changed their corporate culture, such that today, SKF no longer sells bearings. When I share that with someone, they are shocked that this longstanding company could no longer be selling bearings. But really what they have done through this change of culture is what they are selling now is customer uptime and customer productivity. Obviously they still manufacture bearings but the whole mindset of the company is based on customer outcomes or the value that they bring to their customers through this increased productivity and increased uptime. Yes, a bearing is a vehicle for that, but it’s not really what SKF is all about anymore.

Q: Great example, thank you so much for sharing. It was interesting to read in your book that sometimes recommending a competitor’s service or product over your own can actually help you. The idea of giving away business to a competitor sounds like a tough sell, can you explain why and when that can be a good idea?

Steve Brown: I love that question. I think that if your company is sincere in embracing the customer logic or the kinds of things we’ve been talking about, you’ll do what you can to help the customer, even if it means recommending products or services from a competitor. I call this offering agnostic. I think the biggest opposition to be offering agnostic comes from inside your own company rather than from your customers. Your customers are impressed and in some cases are flabbergasted that you would talk about and advocate for a competitor. Inside the firm, some people may say, and some very powerful people may say, what are you doing, recommending our competitors to our customers? Yet a B2B company that is eager for success in offering high level and higher value services can achieve a new level of respect and a new level of trust with their customers by being offering agnostic. Your credibility soars so the next time you make a suggestion or idea that might be related to what you have to offer, it’s a no brainer, they don’t even go out and check with the competitors, they just come directly to you for that need. IBM is probably the first corporation to embrace this idea. Now, we’re seeing more and more enlightened companies recognize that in some cases it’s in not only your customers’ interest but also your interest to recommend a competitor.

Q: Your book speaks to people in leadership roles who are transforming their organizations to grow through services and solutions. What can these leaders, and others, take away from this book?

Mary Jo Bitner: We know that there are so many in this position today and I think that one thing they can take away from the book is some of the lessons learned by others and lessons learnt that we were able to gather and find from the literature presented in a relatively short and straight forward manner. So they can take away some lessons, they can learn some things that can help them as they start on this journey. I think they can also gain a way to think about the journey and the variety of challenges that they are going to need to tackle because what we found is many of these challenges come up over and over again. As Steve mentioned, companies can look at these challenges and say, “this one shouldn’t be too difficult for us”, or “we’re already on the way on that one but we haven’t really thought about this particular challenge”. So each chapter of the book can provide them with some approaches, techniques, insights from others, even some little assessment tools to help them to get started on the journey. Also, I think encouragement that this is a journey worth doing but that it is not a quick fix. I think people sometimes need that encouragement as they start on a major strategic vision like this.

Darima Fotheringham: Professor Bitner, Professor Brown, thank you again for talking with us today. You were listening to an interview with Professor Mary Jo Bitner and Professor Steve Brown. They’re new book is “Profiting from Services and Solutions: What Product-Centric Firms Need to Know”.

Transparency

Is Transparency Good for Business?

By Seigyoung Auh, Omar Merlo, and Andreas Eisingerich

In 2012, the global fast food chain McDonald’s launched a website in Canada called “Our Food. Your Questions”. The digital platform allowed consumers to ask the company absolutely anything about its food. As the website increased in popularity and customers asked some very tough questions, the company and its products were not always cast in a positive light. However, McDonald’s was seemingly happy to face both the good and the bad.

Even the toughest critics could vent or probe in the public forum. Immediately after the launch of this initiative, the Internet was awash with claims that McDonald’s had just committed an enormous marketing blunder. Surely shouldn’t a company always strive to present itself positively, minimize public scrutiny and criticism, and carefully filter customer-generated content on its digital platforms? The outcome of the initiative suggests otherwise. The yearly target for questions was exceeded by 400% in only 6 months. The company experienced 10 million interactions online with customer engagement exceeding 4 minutes per visit. Perceptions of the quality of the food, as well as brand attitude measures improved. Most importantly, customers were spending more on the brand, evidenced by an increase of 50% in monthly store visits.

Many companies, however, remain wary of transparency initiatives, as found in our research. This is primarily because the benefits of being transparent are still unclear and poorly documented. We aimed to shed light on this issue. Specifically, we investigated whether transparency has desirable outcomes or if success stories, such as that of McDonald’s, are merely isolated anomalies. The kind of transparency that we studied in our research pertains to activities carried out by businesses to ensure that the information it disseminates about its products and services is comprehensive, objective, accessible, and easily understood by customers. We called this type of transparency performance transparency and developed a transparency scale (a parsimonious 4 item scale) using data from the retailing and banking sectors.

What does being transparent entail?

Organizations may implement transparency through effective website design, analysis of customer data, and testing of customers’ understanding of technical language. They may also strive to provide information that is objective; in other words information, which does not either selectively exaggerate the positives or discount the negatives of a firm’s offering. In this sense, transparency refers to truth, honesty, frankness, and candor.

A growing number of online media facilitate the exchange of information and enable customers to share their reviews on purchase websites, blogs, social networking sites, and online communities. In light of this, providing customers with access to third party information (e.g., reviews by others) is a critical element of performance transparency.

Consider Adidas Boost running shoe, which on its website had customer Twitter feeds and feedback, sharing their experience with the Boost running shoe, giving each other advice, and even pointing out when the running shoes are most effective (dry and cold versus hot and humid). Offering access to reviews by others may also be integrated into a business’s brand community building efforts. Porsche, for example, engaged its GTS drivers community by actively encouraging them to share feedback, information, and the most exhilarating driving routes etc. with one another.

Does transparency pay off?

Our research suggests that transparency has tangible benefits for those organizations that implement it. The benefits mainly arise out of customer-related effects.

First, a company’s transparency efforts tend to act as a signal of goodwill, which can translate into reduced uncertainty and higher customer trust. Customer trust in turn may translate into lower price sensitivity and higher propensity to purchase, and is of course fundamental to the development of valued and lasting relationships. Our research, based on data collected from customers in the airline, hotel, and retail banking industries, confirms a strong link between transparency, reduced price sensitivity, and higher intention to purchase.

Second, when customers are unable to assess a business on a particular dimension (e.g., service quality, reliability, etc.), they may evaluate that dimension less favorably than if the information had been provided to them. For example, in our study we found that customers who read negative customer reviews about a company may feel more assured and confident in their decision-making process and may select that business over one that has no negative feedback. The presence of some negative information tends to make customers feel that the information they have is comprehensive, that any criticisms voiced by other customers has not been filtered, and that their expectations are clear. In other words, when customers see objective information, they tend to feel that they know the whole story and can make an informed decision. In contrast, absence of such information, or overly one-sided information, fails to remove customer uncertainty to the same degree.

Third, contrary to what one might expect, we found that businesses that might be most concerned about being transparent may be the ones that stand to gain the most by signaling efforts in creating quality for their customers. Specifically, we discovered that firms that are viewed as somewhat less capable by consumers benefited even more from being transparent than firms viewed as highly capable. Transparency may thus afford firms with a novel way to differentiate their product offerings and set themselves apart from competition, especially for firms that are perceived to be less competent in delivering high service performance.

Conclusions and Implications

Our research clearly suggests that customers will buy more and spend more when dealing with firms that are transparent. Therefore, companies should consider sharing information with customers that is balanced, objective, easy to access, and easily understood. We would also encourage businesses to rely on their customers as a valuable source of information to aid other potential customers, whether through third-party review sites, open feedback on the company website, or by facilitating customer complaints, etc. Importantly, businesses should not shy away from negative feedback, as it can reduce customer uncertainty and can be a valuable opportunity to establish trust. Managing negative feedback in a public manner can build confidence not only with the customer who voiced the concern, but also potentially with anyone else witnessing how the company handled the situation. Finally, the disclosure of both positive and negative reviews is indicative of a company that cares more about its customers than about its products or services.

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Seigyoung Auh is an Associate Professor of Global Marketing at Thunderbird School of Global Management at ASU. Seigyoung’s research interests are in the areas of frontline employee’s customer orientation diversity, fit in climate and its impact on frontline employee attitude and performance, service innovation, service leadership, knowledge sharing/transfer in sales teams, sales team learning and conflict. His work has been published in a number of academic journals including Journal of Retailing, Journal of the Academy of Marketing Science, Journal of Service Research and others.  Seigyoung has worked as a marketing scientist before entering academia and has taught in Australia, Canada, and Korea, before joining Thunderbird.  Seigyoung has executive education experience with leading global firms such as Samsung Electronics Company and Hyundai Motors. He also served as the co-director for the CEO franchise program in Korea before joining Thunderbird.

Omar Merlo is Assistant Professor in Marketing at Imperial College Business School.  He was awarded his Ph.D. in marketing strategy from the University of Melbourne and his research is primarily in strategic marketing, services marketing, and customer relationship management. His research has appeared in numerous leading practitioners and academic journals, such as MIT Sloan Management Review, Journal of Service Research, European Journal of Marketing, Industrial Marketing Management, Journal of Business Research, Marketing Letters, and others. Dr Merlo consults and teaches for numerous organisations around the world both in the private and public sectors.

Andreas B. Eisingerich works as associate professor in marketing at Imperial College Business School, Imperial College London. He has published on customer-brand relationships, customer engagement, and service management in the Journal of Consumer Psychology, Journal of Marketing, Journal of Service Research, Journal of Business Research, Harvard Business Review, California Management Review, and MIT Sloan Management Review, among others, and currently services on the editorial review board of the Journal of Service Research.

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The article Service Firm Performance Transparency. How, When, and Why Does It Pay Off?, featured in the post, was co-authored by Yeyi Liu (University of Leeds, UK), Andreas B. Eisingerich (Imperial College London, UK), Seigyoung Auh (Thunderbird at ASU), Omar Merlo (Imperial College London, UK) and Hae Eun Helen Chun (Cornell University). It is available ahead of print at Journal of Service Research website. Journal of Service Research is the world’s leading service research journal that features articles by service experts from both academia and business world.

Note: All content within this website is the property of Center for Services Leadership. Any use of materials, except for social media sharing, without the prior written consent of Center for Services Leadership is strictly prohibited.

How Does the Referral Behavior of Switchers and Stayers Differ?

Center for Services Leadership:

Are you trying to increase customer referrals? This research suggests to target a specific segment for maximum results.

Originally posted on Management INK:

[We’re pleased to welcome Alisha Stein and B. Ramaseshan, both of Curtin University. Drs. Stein and Ramaseshan recently collaborated on their paper recently published in Journal of Service Research entitled “Customer Referral Behavior: Do Switchers and Stayers Differ?”]

02JSR13_Covers.inddWe recognized that in today’s highly competitive market environment, customer referral plays an important role in enhancing firm value through cost-effective acquisition of new customers. Service managers have to leverage the current customer base to increase referrals. To do this effectively requires an understanding of the heterogeneity among their existing customers. Such an understanding will enable service providers to develop separate customer referral strategies that are most appropriate to each of the distinct groups within the customer base. Recognizing this, we examined the customer referral behavior across two distinct customer groups – ‘switchers’ and ‘stayers’. Switchers are those who have switched to the service provider from another, while Stayers are customers…

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Nancy Stephens

Examining the Student Experience Using Service Blueprinting (EDUCAUSE Review) | EDUCAUSE.edu

“Students often face problems accomplishing their goals because colleges and universities have poor processes. Service blueprinting, a type of process map, focuses on the student (or customer) experience and illuminates things an organization can do to identify and fix problem processes.” In her recent EDUCAUSE article Nancy Stephens shares 3 different examples of how Service Blueprinting can be used in Higher Education.

Do you have examples of how your teams used Service Blueprinting? Let us know! 

Click on the link below to read the EDUCAUSE article:

Examining the Student Experience Using Service Blueprinting (EDUCAUSE Review) | EDUCAUSE.edu

Being Your Customer’s Hero: Interview with Adam Toporek.

cts_toporek-adam_headshot_main_300Your new book, Be Your Customer’s Hero, is launching next week. Tell us, what inspired you to write this book?

My desire to write this book came from the old business axiom of “find a need and fill it.” However, the need I was filling was first and foremost my own. Be Your Customer’s Hero is the book I always wished I’d had during my years of owning and running retail service businesses.

I’d always wanted a single book I could hand to frontline employees that would give them a comprehensive set of tools and techniques for becoming great at customer service. A book that spoke to them in an easy-to-read conversational way about the realities they face day to day. Despite all the amazing books on customer service and customer experience on the market, that book didn’t exist. So I wrote it.

In your opinion, what prevents most frontline service professionals from delivering superior service?

External factors are a big part. Store policies, lack of empowerment, and ineffective systems are just a few of the challenges frontline service professionals face. Organizational leaders need to always be looking at the structural impediments which prevent frontline professionals from delivering great service.

Internal factors are just as important and often more difficult to overcome. Most of the time, these boil down to mentality – how frontline reps view customers, how they handle their own emotions, and how confident they are.

Competence and confidence are particularly important to delivering superior service. Oftentimes with frontline employees, it may be their first job or it may be their first time working in that specific environment. By using culture and training to instill a customer-centric mindset and bolster service skill sets, organizational leaders can give frontline workers both the confidence and competence they need. Continue reading

What You Need to Know When Migrating your Customers to Digital Channels

Peter VerhoefBy Peter C. Verhoef

Firms constantly re-evaluate their service channels. Customers are serviced through multiple channels, but usually use their preferred channel most frequently. However, some channels are more costly for the companies than other channels. Channels involving service employees, such as call centers, are much more expensive, especially when compared to the digital self-service channels. As a consequence, many firms like to steer customers to their less costly channels. By doing so, companies can improve their bottom-line and eventually eliminate the more costly channels. Although digital channels can be perfectly suited to serve customers, steering customers to the digital channel can have negative consequences! We investigated negative consequences of steering customers to a digital channel in an experimental study with Dutch customers. Migrating customers can be a painful process, but as our research shows, the negative consequences can be softened or eliminated.

Typically firms have a number of different strategies for migrating customers to digital channels: Continue reading

The Victuous Cycle

Terry CainBy Terry Cain

EVERY EMPLOYEE, EVERY MINUTE, EVERY DAY…Making memorable moments for our customers…yeah, right!!!

This idea of ‘culture eating strategy for breakfast’ applies to having a consistent customer experience via a consistency in the culture. Our cultures have cycles of virtue and cycles of vicious. Which cycle are you in?

The Virtuous Cycle of service embraces the above headlines along with the attitude that goes with it. We are personable (meaning we are relationship-oriented) and we acknowledge the person on the other line, or on the end of the e-mail, or through a web event as a real person. We call them by name, we say please and thank you, and we verify that we served them the way they would like to be served and expect to be served. We do this internally and externally, creating positive vibes around the customer experience and it’s a part of our culture. Continue reading