A brief note on Supplementary service verses standard service:

The service as a product is essentially described as a package or bundle of

different services, tangibles and intangibles, which all together form the total
product. The package is divided into two main categories: the first one is the
main service, which is called the 'core service' or 'substantive service'. The other
one is 'auxiliary services' or 'extras', which are often referred to as 'peripherals' or
'peripheral services'. These are also known as supplementary services. The core
service is the basic value provided by the service product. It is the reason to
purchase or consume services. This is the reason for which any company is in
business too. Supplementary services are those that facilitate and enhance use
of the core services. These are services other than core that companies offer to
their customers to give additional value to their products or to encourage
customer loyalty.

Flexible Services Offering:

It has been observed through research that most suppliers typically provide
customers with more services than they want or need at prices that often reflect
neither the value of those services to customers nor the cost of providing them.
Too many times the manufactures continue to let sales people give away
whatever services they think it will take to land a deal, even if those freebies
dramatically reduce the profitability of business.

To overcome the cost associated with the above issues, the author has
suggested the ‘flexible service offering’ model to enable manufacturing and
service companies reduce the number and cost of services they use to augment
their core products. This approach enables the company to identify a naked
solution or a naked system (which is the bare-bones-minimum number of
services uniformly valued by all customers in a given segment at the lowest
possible price that yield a profit). These naked solutions are then wrapped with
options – particular services valued by individual customers within the segment.

The steps to achieve flexible service offering are,

 Understand the supplementary services portfolio. If the company compiles
the complete inventory of supplementary service, then it can assess the
value of each service and the cost of providing it.

 Assess the value of the service rather than just measuring the customer
satisfaction. Results indicate that while customers determine their re-
purchase intention based on both core and supplementary service quality,
mediated by value and satisfaction there is a direct and positive
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relationship of involvement between customer satisfaction and value of

supplementary service provided.
 Extend the activity-based-costing technique to supplementary services as
well. If the manufacture can break down costs on segment-to-segment
and customer-to-customer basis, then it is viable to determine the
value/price of the service being offered. This helps industries to target
those market segments where their products or services provided the
greatest value to customers and thus held the greatest potential for profit.

 Identify the existing standard services that can be done away with or
specialized services that can be part of standardized services. Identify the
existing optional services that can be discontinued. The benchmark here
is simple: if the cost of the optional service exceeds the customers’
willingness to pay for it, the service should be discontinued.

 Apart from identifying the standard or optional services, to stay ahead in

competition a manufacture has to continually innovate and produce new
value added services.

**For example in a survey taken by Hong Kong mobile phone industry to

gauge the benefits of the supplementary services among the customers, it
was reveled that the only one of the supplementary services (both optional
and standard like pricing policy, staff assistance, customer service and
transmission quality and network coverage) factor in the satisfaction
determinants among the mobile phone users. The results suggest that
network providers should focus more on transmission quality and network
coverage as the core attributes of their service offerings and formulate
appropriate pricing policy, rather than competing or focusing more on
supplementary services like varied customer services.

Benefits:

When the supplementary services are offered with all the above attributes
discussed in the flexible services offering section, there are lot many benefits the
service providers gain and it also establishes the fact that trimming the
supplementary services to what is required and beneficial to the manufacturer
has benefits that far outweigh the benefits of keeping all the supplementary
services just so as to satisfy the customer and keep the market share.
 Flexible service offering provides suppliers with a powerful means of
retaining and expanding business with their most valuable customers.
 Helps customize the packages of products and services to meet more
precisely the requirements of its spectrum of customers.
 Enables managers to be more adaptive and responsive in their pricing.
 Flexible service offering helps companies to revamp their sales force
philosophies and practices. More control is given in the hands of the sales

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team there by enabling sales team to be more persuasive in explaining the

value of services to the customers.
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Case Study: Credit Card Marketing in Indian Industry

The case study below deals with managing perceived risk for credit card
purchase through supplementary services.

Supplementary services can play a significant role in controlling functional and

psychological perceived risk associated with credit card services. Marketers of
credit cards can enhance the value of services to customers and can thus
enhance purchase possibilities by reducing perceived risk through
supplementary services that are controllable. Perceived risk is defined as the
uncertainty that consumers face when they cannot foresee the consequences of
their purchase decisions.

The supplementary services recognized in this case were,

 ATM access, cash advance, and cash withdrawal and other facilities to
meet financial requirements effectively.
 ATM access, cash advance, and cash withdrawal facilities with credit card.
 Through add-on card other family members can also use the credit card.
 Buying airline/railway tickets by using credit card at special counters save
time.
 Additional facilities with credit card increase its usage value.

In a study done by the author (Dr. Anita Goyal), it was revealed that 79.26%
agree with the idea that supplementary services provide operational value. It was
also inferred that there were significant differences in the frequency of
perceptions towards the statements indicating the functional utility of
supplementary services available with credit cards. 70.64% agree that
supplementary services with credit cards help them to take care of psychological
risk. There is a favorable perception of supplementary services in controlling the
psychological risk. Respondents feel mental satisfaction to have supplementary
services with credit cards.

Thus, consumers while deciding for a credit card purchase consider facilitating
services and supplementary services as significant in providing help to
consumers for pre-purchase evaluation of credit cards and to make credit card
purchase decisions in the Indian environment.

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References:

1. ** Customer Satisfaction in the Hong Kong Mobile Phone Industry.

- Service Industries Journal; Jul99, Vol. 19 Issue 3, p162-174, 13p, 3 charts
http://search.ebscohost.com/login.aspx?
direct=true&db=bth&AN=2514451&site=ehost-live

2. ## Managing perceived risk for credit card purchase through supplementary

services.
- Journal of Financial Services Marketing; Mar2008, Vol. 12 Issue 4, p331-345,
15p, 6 charts.
http://search.ebscohost.com/login.aspx?
direct=true&db=bth&AN=31227169&site=ehost-live