210 CHAPTER11 DESIGNING ANDMANAGINGSERVICES
- Design a more effective service. For example, hiring paralegal workers reduces the
need for more expensive legal professionals. - Present customers with incentives to substitute their own labor for company labor.
Customers of iPrint (www.iprint.com) save at least 25 percent by designing, inputting,
and proofreading the content of their printing jobs before submitting their orders
through iPrint’s Web site.^31 - Use technology to give better customer service and make service workers more pro-
ductive. Companies, such as Cisco Systems, that use their Web sites to empower cus-
tomers can lessen workloads, capture valuable customer data, and increase the value
of their businesses. Cisco’s on-line Knowledge Base of Frequently Asked Questions
(FAQs) allows customers to quickly find answers to questions without talking to any
employees. As a result, Cisco cut the number of customer calls by 70 percent or
50,000 calls a month, saving $10 million a month.^32
MANAGING PRODUCT SUPPORT SERVICES
Although service industries are an important part of the economy, a growing number
of product-based industries are also offering a service bundle. Manufacturers of equip-
ment such as small appliances, computers, tractors, and airplanes generally have to
provide product support services. In fact, product support service is becoming a major
battleground for competitive advantage. Some equipment companies, such as
Caterpillar Tractor and John Deere, make over 50 percent of their profits from these
services. In the global marketplace, companies that make a good product but provide
poor local service support are seriously disadvantaged. This is why Subaru contracted
to use the Australian Volkswagen dealer network to provide parts and service when it
began selling its autos in that market.
To design the best service support program, a manufacturer must identify and
prioritize the services its customers value most. In general, customers worry about
three things:^33
➤ Reliability and failure frequency.Customers buy with an expectation of reliability. A
farmer may tolerate a combine that breaks down once a year, but not more often.
Similarly, eBay’s on-line auction customers are concerned when the Web site is
unavailable or experiencing problems.
➤ Downtime duration.The longer the downtime, the higher the cost, which is why
customers count on the seller’s ability to fix the product (laptop, minivan) quickly
or at least provide a loaner.^34
➤ Out-of-pocket costs of maintenance and repair.Customers are concerned with the amount
they will have to spend on regular maintenance and repair costs (such as
replacement batteries for laptops).
A buyer considers all of these factors when choosing a vendor. As part of the
decision process, the buyer tries to estimate the life-cycle cost,which is the product’s
purchase cost plus the discounted cost of maintenance and repair less the discounted
salvage value. Smart companies therefore consider the costs and the options for dif-
fusing customer worries when designing presale and postsale support services.Presale Service Strategy
Before any sale can be made, the marketer has to design an appealing and competitive
service offer that will attract customers. In the case of expensive equipment, such as
medical equipment, manufacturers offer facilitating servicessuch as installation, repairs,