Aftermarket Services and Reverse Logistics firms in high-tech industries. Strategic Service Core Concepts Presentation related to marketing and selling service logistics.

1. MARKETING
AND SELLING
SERVICE
LOGISTICS
Presented by
MICHAEL R. BLUMBERG
© Copyright, 2006

2. What we do…
• Business & Strategic Advisory Services
– Strategic & Business Planning
– Market Research & Customer Satisfaction
– Benchmarks & Best Practices
– Systems Design, Evaluation, & Recommendation
– Mergers & Acquisitions
• Founded in 1969
• Headquartered In Suburb of Philadelphia
• Global Focus
• Broad Industry Expertise in Aftermarket

3. Who we have helped…
• IBM Global Services • Network Appliance
• ABB • Eastman Kodak
• Siemens • AGFA
• General Motors • Xerox
• Nokia • Boston Scientific
• Johnson Controls • Carrier
• NAACO • Panasonic
• Lucent • National Archives
• 3Com • Bank of America

4. STRATEGIC
SERVICE
CORE
CONCEPTS

5. 10 Reasons why businesses fail
• Choosing a business that’s not profitable
• Inadequate cash reserves
• Failure to clearly define and understand your market, your customers, and
your customers’ buying habits
• Failure to price your product or service correctly
• Failure to anticipate or react to competition, technology, or other changes
in the marketplace
• Overgeneralization
• Over dependence on a single customer
• Uncontrolled growth
• Believing you can do everything yourself
• Not understanding dynamics of the service
industry

6. STRATEGIC SERVICE BASIC CONCEPTS
Every product includes and/or generates
service needs
Service is greater and worth more than tangible
product to the customer over life cycle
Service is primarily perception as seen through
customer view point; customer perceptions
determine service level
Service price is largely determined by value-in-use
to customer
Service must by managed, delivered, and controlled,
just like a product

7. COMPARISON OF PRODUCT AND SERVICE
BUSINESS MODELS
Product Firm Market
INVENTORY
LABOR
PRODUCT
PRODUCTION UNITS OF GOODS REALITY
MATERIAL
FINANCE
( REVENUE -COST)
PAYMENT FOR GOODS
Service Firm
Market
SERVICE PERCEPTION
DEFINED CAPABILITY OF SERVICE
“CAPABILITY TO
DATA SERVE” (SPEED, RESPONSIVENESS,
COVERAGE, ETC...)
REALITY
LABOR SERVICE
PRODUCTION
UNITS OF SERVICE
MATERIAL FINANCE
( REVENUE -COST)
PAYMENT FOR SERVICES

8. COMPARISON OF TYPICAL PRODUCT
AND SERVICE BUSINESS RATIOS*
KEY PARAMETERS PRODUCT BUSINESSES SERVICE BUSINESSES
REVENUE 100% 100%
GROSS MARGIN 40% 45%
RESEARCH & 6% - 8% 1% -2%
DEVELOPMENT
OTHER, INCLUDING 5% - 8% 2% -3%
INVENTORY
CORPORATE 20% -30% 15%
OVERHEAD & G&A
PROFIT BEFORE TAXES 6% -15% 15% - 30%
ROA 7% - 15% 70% - 80%

9. Summary Comparison Between Product
and Service Sales Process
COMMENT
STEPS SERVICE PRODUCT
• LOOK FOR FORM, • STEPS USUALLY PERFORMED
1. IDENTIFY AND • LOOK FOR
FIT AND FUNCTION AT A CORPORATE OR
ESTABLISH PERCEPTION, VALUE-
PRODUCT
STRATEGIES IN-USE, AND TIME
MANAGEMENT LEVEL FOR
AND
PRODUCTS
PRODUCTS
• OFTEN LACKING FOR SERVICE
• IDENTIFY PROBLEM IN • LOOK FOR NEEDS FOR • STEPS USUALLY PERFORMED
2. MARKET RESEARCH CUSTOMER TERMS FORM, FIT AND AT
• MEASURE TIME FUNCTION A CORPORATE OR MARKETING
PARAMETERS AND • MEASURE REALITY LEVEL, BUT NOT NORMALLY
OTHER REQUIREMENTS IN SERVICE
• MEASURE PERCEPTION • TYPICALLY DONE BY SALES
3. DEVELOP SALES • CUSTOMIZED SALES • SELL FORM, FIT, AND • PERSONNEL FOR SERVICETO
SALES APPROACH TENDS
APPROACH APPROACH TO FUNCTION BE DEFINED BY PRODUCT
SPECIFIC CUSTOMER FORM, FIT, AND FUNCTION
SEGMENTS AND NEEDS •SERVICE APPROACH MUST BE
DEVELOPED
4. CARRY OUT SALES • ELIMINATE • SELL AGAINST • SELLING APPROACH
APPROACH COMPETITION COMPETITION AND CLOSE DIFFERENT
& CLOSE • FOCUS ON VALUE- • FOCUS ON COST PLUS
IN-USE PRICE OR COMPETITIVE PRICE
• DELIVERY IMMEDIATE FOR
• INSURE DELIVERY OF • DELIVERY REALITY PRODUCT
5. DELIVER
“WARMS & FUZZIES” OFF-THE-SHELF • DELIVERY IN FUTURE FOR
• MEET PERCEPTIONS SERVICES
ART-160- P

10. Product Versus Service Revenues
Over Product Life Cycle
INTRODUCTION GROWTH MATURATION
PRODUCT
SALES
REVENUE
SERVICE
SALES
TIME

11. PRODUCT VERSUS SERVICE SUPPORT
REVENUE STREAM CONTRIBUTION
CUMULATIVE
REVENUE
STREAM
REVENUE
INSTALLATION
$
PRODUCT
INITIAL MAINTENANCE & REPAIR
WARRANTY
1 2 3 4 5 6
YEARS

12. STRATEGIC SERVICE VALUES
SERVICE VALUES KEY FACTORS
• Service is most critical to the customer in final
DIRECTLY INFLUENCING SALES Selection decision
AND ADDING VALUE
• Service adds value
• Customers are willing to pay for the
Service directly
GENERATING REVENUE AND
PROFITS DIRECTLY • Customer’s willingness to pay is
Based on value in use – not cost
• Service customers tend to stay with
PROVIDING MARKET Provider once satisfied
CONTROL
• Perceived satisfaction levels
generate substantial loyalty
ART-160- PC

13. CRITICAL TIME FACTORS IN
SERVICE ISSUES
- CHECK CASHING SERVICES -
BANK A
BANK B BANK C

14. Relationship of Desired Service Completion
Time to Customer Satisfaction Levels
80 %
RESPONDENTS
%
DESIRED SERVICE COMPLETION TIME
100 %
SERVICE
SATISFACTION
LEVEL
50 %
SERVICE PERFORMANCE TIME

15. Service Price Elasticity of Demand
QUALITY
SURROGATE
HIGHER
HIGHLY
INELASTIC
DEMAND
LINEAR OR
NEAR LINEAR
LOWER
HIGHLY ELASTIC
LOWER HIGHER
PRICE

16. Product / Service Cross
Elasticity Alternatives
HIGH SERVICE /
PRODUCT
PRODUCT BIASED CROSS
LOW CROSS ELASTICITY
ELASTICITY;
PRODUCT PULLS
THROUGH
SERVICE SALES
PRODUCT
DEMAND SERVICE BIASED
LOW CROSS
ELASTICITY;
SERVICE PULLS
THROUGH
PRODUCT SALES
SERVICE PRICE

17. Marketing Components of
Product and Services
MARKET PRODUCTS
DIMENSIONS SERVICE
FORM, FIT
AND YES YES
FUNCTION
PERCEPTION, LABEL YES YES
ADDED VALUE OF LABEL
OR PERCEPTION FOR 10 - 25 % 50 - 500 %
EQUIVALENT FORM, FIT,
AND FUNCTION

18. Conclusion
500 Office Center Drive
Suite 400
Ft. Washington, PA 19034
Phone: 855-643-9060 Ext. 703
Website: www.blumberg-advisor.com
Email: michaelb@blumberg-advisor.com