Managing Product Support Services 211
and financing. They may also add value-augmenting services.Look at Herman Miller, a
leading office-furniture company that works hard to understand and then deliver what
its business customers value. Along with quality products, the company offers: (1) 5-year
product warranties; (2) quality audits after installation; (3) guaranteed move-in dates;
(4) trade-in allowances on furniture systems products; and (5) easy on-line ordering.
A manufacturer can offer and charge for enhanced product support services in
different ways. One specialty organic chemical company provides a standard offering
plus a basic level of services. If the customer wants additional services, it can pay extra
or increase its annual purchases to a higher level, in which case additional services
would be included. In a variation on this, Baxter Healthcare offers strategic customers
bonus points (called “Baxter dollars”) in proportion to how much they buy. They can
use the bonus points to trade for different additional services. As another alternative,
companies such as Compaq and IBM sell add-on service contracts in various lengths so
customers can choose the service level they want beyond the basic service package.
Postsale Service Strategy
In providing postsale service, most companies progress through a series of stages.
Manufacturers usually start out by running their own parts and service department,
because they want to stay close to their products and learn about any problems right
away. They also find it expensive and time-consuming to train others. Often, they dis-
cover that they can make good money running the parts-and-service business—and, if
they are the only supplier of certain parts, they can charge a premium price. In fact,
many equipment manufacturers price their equipment low and compensate by
charging high prices for parts and service. This explains why competitors sometimes
manufacture the same or similar parts and sell them to customers or intermediaries
for less.
Over time, manufacturers—especially those who expand into international mar-
kets—switch more maintenance and repair services to authorized distributors and
dealers. These intermediaries are closer to customers, operate in more locations, and
can offer quicker service. Manufacturers still make a profit on the parts but leave the
servicing profit to their intermediaries. Still later, independent service firms emerge.
Over 40 percent of auto-service work is now done outside franchised automobile deal-
erships, by independent garages and chains such as Midas Muffler and Sears.
Independent service organizations have sprung up to service computers, telecommu-
nications products, and other items, typically offering lower price or faster service
than offered by the manufacturer or authorized intermediaries.
Ultimately, some large business customers may prefer to handle their own main-
tenance and repair services. A company with several hundred personal computers,
printers, and related equipment might find it cheaper to have its own service person-
nel on site. These companies typically press the manufacturer for a lower product
price because they are providing their own services.
Major Trends in Customer Service
Service remains a critical component for product marketers in today’s dynamic, inter-
connected global marketplace. Lele has noted the following major trends in the cus-
tomer service area:^35
- Equipment manufacturers are building more reliable and more easily fixable equip-
ment. One reason is the shift from electromechanical equipment to electronic equip-
ment, which has fewer breakdowns and is more repairable. Companies are adding
modularity and disposability to facilitate self-servicing by customers.