Services Strategy

Segmenting offerings to better optimize the 'Cost, Inventory, Service' triangle

In the last few decades, customer service has been given top priority in an effort to meet customers’ changing needs, stand out from the competition, and build customer loyalty.

Context and challenges

The service offering is at the very heart of the business model for after-sales and in-service support:

  • Spare parts
  • Field services
  • Maintenance, repair, overhaul, and upgrade services
  • Services that guarantee the availability and functionality of the equipment

It is therefore necessary to define the service offering in precise terms, according to the expectations of the different customer segments, and particularly in respect to:

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  • Response times
  • Product supply lead times (24 hrs, 48 hrs, etc.)
  • Commitment to the availability of systems and associated penalties
  • Pricing and billing terms and conditions

The operational implementation of these service offerings can have an impact on:

  • Customer relations (organization, specific channels and processes for interacting with the customer)
  • Location and level of stocks
  • Logistics infrastructures (number and location of the platforms)
  • Supply Chain processes (demand, production and procurement management, order taking, and stock allocation)
  • Operational organization

It is therefore a question of maximizing the commercial effectiveness of the service policy whilst optimizing those resources required. The most commonly observed problems are:

  • Failure to adequately analyze the actual value delivered to the customer by the proposed services
  • A tendency to provide premium offerings to all customer segments
  • No real control over service costs or the development of customer profitability
  • An increasingly complex Supply Chain due to an abundance of offerings
  • Difficulty in delivering a good service level in relation to these offerings

In the face of these problems, revising the service offering portfolio can serve two purposes:

  • Standardize all that can be standardized: process streamlining and cost sharing
  • Differentiate whatever needs to be differentiated: a focus on certain customer segments, and the potential for direct or indirect revenue

A number of essential elements are involved in this process:

  • Listening to the market together with the Sales and Marketing Departments (consulting the sales force, existing and prospective customer surveys, analyzing the competition)
  • Segmenting customers (commercial potential, attractiveness, current/projected profitability, logistical behavior, expectations expressed)
  • Segmenting offerings (basic, special) and matching the definition of the offers to the analysis of impacts on the Supply Chain and logistics processes
  • Linking offerings and customer segments in line with the sales strategy (competitive investments, leverage for negotiations with customers, billing for services)
  • Analyzing the cost and inventory associated with the various scenarios for providing and potentially billing the offering, and defining the break-even point between costs, inventory, and income
  • Ensuring that the Sales, Marketing, and Supply Chain departments work together to determine the best trade-off decisions
  • Planning how to deploy offerings in accordance with the time taken to implement the relevant prerequisites in terms of organization, processes, infrastructures, and information systems (once the scope and potential of the offerings have been agreed)
  • Managing the relevant changes in the departments involved and informing customers accordingly

 

How can Argon Consulting help you?

Argon Consulting helps its customers to re-engineer every aspect of their after-sales service strategy, supporting at every step of the way from the design stage of the service offerings to implementation.

Case Studies

Improvement of management practices of maintenance interventions and spare parts stock management