Gaining Competitive Advantage Through Customized Service Offerings
and Relationships

by Marcia Harrington

To gain an edge in today's highly competitive marketplace, companies are moving swiftly to customize their service offerings and relationships with customers. Nowhere is this trend more evident than in the telecommunications business, where dozens of service options have replaced the "one size fits all" telephone service of 15 years ago. But the shift is occurring in many other service industries as well. For example:

• Hotels now offer a wide variety of rooms and services, as well as customer loyalty programs (which create differentiated relationships)
• Medical insurers now offer high and low rate plans, as well as options for other services such as dental and psychiatric coverage
• Financial institutions now offer many new services, including automatic deposit, telephone transfers, Internet access, overdraft protection and credit card services, in combination with traditional services such as savings and checking accounts and loans
• Gas and electric utilities are starting to break apart their standard packages to offer customers different levels of service and new services targeted to specific segments
• Membership-driven associations are reassessing the value of long-standing services, and offering different packages of these services to meet the needs of different member populations.

Rockbridge recently conducted research for a major telecommunications company on a new service the company was planning to offer to its business customers. Initially intended to identify a single mix of options, the research instead pointed to the need to offer as much flexibility as possible, so that businesses could tailor the new service to fit their specific requirements. Factors influencing the customization included size of business, industry category, market area and customer base (business or consumer), business hours of operation, and employee profile. In consumer research, as opposed to business-to-business research, factors influencing customization preferences are just as complex, if not more so, and may include lifestyle, employment, household demographics, economics, and political and religious views.

Although customers might desire the ability to customize all aspects of the services they purchase, providing that level of flexibility is not feasible for most service providers. Fortunately, by doing market research companies can identify:

1. Which options can be held constant (e.g., timing of cycle: one year)
2. Which options require flexibility (e.g., regions where service is provided: by city, county, city and specific suburban counties, or state)
3. Which customers need more intensive relationship to remain satisfied and/or loyal, and
4. Segments of customers with similar needs.

Focus groups can be a good way to learn about how businesses or consumers use a particular service, the environment in which they use the service, and the requirements that drive the purchase process. From its years of experience conducting focus groups, Rockbridge has developed proprietary techniques for getting this feedback from focus groups while avoiding some of the technique's pitfalls--most notably, the tendency to "group think."

Quantitative research studies can further refine focus group findings. When quantitative research is indicated, Rockbridge Associates typically employs a telephone or mail survey to verify which customization options are most important to customers. Rockbridge may also perform segmentation analysis to learn which services are used in combination with one other and to develop profiles of customer segments; these segments might include aspects of the optimal service relationship. Also, pricing can also be integrated into the research to optimize pricing packages and/or develop trade-off options.

Customizing service options is key to outpacing the competition in today's intensive marketplace. Prudent companies will rely on market research to guide their decisions about service offerings and to define the appropriate service relationship for each customer.