The revolution of purchase behaviour that began in the last decade does not show signs of abating. Instead of owning individual products, customers have begun to prefer all-inclusive service models. Innovative service providers with outsourcing skills have been able to concentrate their resources on developing the customer experience. Examples of companies using the new model include e.g. Airbnb, Spotify and Uber.
Of the businesses mentioned above, Airbnb is a great example of a new business model in the accommodation industry. Airbnb offers a platform for individuals to rent out their apartments to others. Airbnb is competing in the accommodation sector with e.g. Hilton, a true giant in the field. Hilton has operated in the field since 1919, and Airbnb since 2008. Hilton has millions of dollars tied up in real estate, whereas Airbnb has not tied up a single penny in the properties that is offers. Currently, the market value of Hilton is approximately 23 billion dollars, which now pales next to Airbnb’s 30 billion dollar valuation.
In addition to new, innovative businesses, several traditional businesses have also developed new service model solutions to meet their customers’ needs better. Tire manufacturer Michelin understood that simply owning a tire is not an aim in itself for all customers, but many large customers primarily want their stock to use safe, fuel-efficient tires. Consequently, Michelin has create an extremely successful concept whereby the company’s experts make sure that their customers always have the most appropriate tire solution for their stock. If the set fuel saving goals are not reached, the customer does not need to pay for the service.
When shifting from traditional product sales to service sales, one must take into consideration that selling the exact same product at an inexpensive monthly rate instead of a one-off price does not fulfil the customer’s needs in the best possible way. What is provided and how it is provided should be reconsidered when shifting towards service operations.
More and more customers want outcomes, not ownership. At the same time, customers appreciate a personalised experience and a customised package that is created by adding a service adapted to the customer on top of the product. Also, as technological change accelerates, the need of customers to update services more frequently has also increased.
The development of a deep customer relationship is further highlighted in service operations. Customers who feel that they are effortlessly receiving a service produced for them are much more loyal than buyers of a product alone. Due to this, many suppliers who have shifted away from traditional product sales have achieved customer loyalty that is comparable to that of hair salon services. Instead of a focus on products, the shift towards service operations requires an in-depth understanding of customer needs.
When service business is successful, everyone is a winner. The customer gains the most important benefits for him or her more effectively from the acquisition. The supplier, on the other hand, gains valuable, predictable cash flow and additional income from the added value provided, which serves as a good basis for refining the launched service operations even further.
I wish you all a service-filled spring!