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- O r g a n i z a t i o n a l _ I n n o v a t i o n -
Art Middlebrooks
Many leaders within today's service companies are moaning that: "Our services are becoming commodities.", "The competition just lowered its prices -- again!", and "Customers don't seem willing to pay for our higher quality levels." Companies in industries as diverse as telephone service, corporate banking, fast food, and electric and gas utilities find their customers switching to save a few dollars. The bottom line is that customers don't see or feel a perceptible difference in the services offered -- at least not enough to keep them loyal to one company!
The late 1980s and early 1990s brought a rash of long-overdue quality initiatives to many service industries. Companies began to define customer- driven service standards, benchmark performance versus competition, track customer satisfaction and customer retention levels, and implement far-reaching service quality improvement programs. And customers have benefitted -- even though quality strides can still be made, many American service industries now boast the best service levels in the world!
Can service quality get better?
Absolutely! Is it worth the on-going investment to track and improve quality levels?
... probably not, at past spending levels. In most service indus- tries, the minimum quality threshold for customers has already been met, and return on quality investments is diminishing. If customers have difficulty perceiving and valuing quality differences today, why should we expect future quality improvements to keep customers around?
Breaking the commodity cycle in services demands that service companies embark upon the painful process of saying, "NO!" It means not being everything to everybody. Many service companies find it difficult to turn away customers. They continue to focus broadly on the needs of the many rather than specifically on the needs of the few.
Breaking the commodity cycle in services requires following five key tenets of services differentiation:
1. Select and focus on a targeted segment of customers.
2. Develop a differentiated positioning that is valued by those customers.
3. Create an array of products, services and customer service levels that offer
a unique value proposition to your target customers.
4. Innovate continuously to enhance current services and develop new, highly
valued services for target customers.
5. Communicate creatively to point out the meaningful differences you bring, in such a way that your target customers will hear you.
Improved quality levels will not be enough to win the service challenge. We need to start by saying "No!"
Art Middlebrooks is a principal at Kuczmarski & Associates, Inc. He teaches "The Marketing of Services" at the University of Chicago Graduate School of Business. Article reprinted with permission from Kuczmarski & Associates' newsletter, InnovationMINDSET. For more information, contact 312-988-1525.
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