26 Jun 15 Is B2B manufacturing already a service?

Service quality determines manufacturing success

Recently, I’ve been reading a lot about “manufacturing as a service” – which is mostly about disruptive cloud-based models we might see in future. Later, while reviewing one of our customer perception studies for a traditional industrial product, I noticed that factors around quality of service were influencing buying decisions substantially. This set me thinking. Is this the same for other B2B products? Do different end-use or customer segments behave similarly?

Fortunately, we’ve done loads of research studies on what influences B2B buying decisions and how customers rate their suppliers. So, I decided to trawl through a couple of years of research across industries and products (compressors, UPS, boilers, commercial ACs, medical equipment, industrial lighting, technology, etc.), to see what came up.

Given the variety of products and end-user segments, for simplicity, I’ve clubbed parameters that influence buying into four buckets:

  • Quality: product quality, efficiency, life, performance parameters. In certain segments aesthetics or extent of product range might be important.
  • Price: Initial cost, lifetime cost, operating cost.
  • Quality of service: looks at factors not inside the product, but at how customers are engaged through the life of the product. These factors are: delivery and response time, knowledgeable service personnel, delivery/availability of parts and maintenance, ease of maintenance.
  • Brand: The buyer’s perception of the brand, and its influence on purchase decisions.

When we looked at parameters (or sub-parameters) buyers rated as important, versus how they rated their suppliers on the same criteria – we found some interesting insights that corroborated the hypothesis.

  • Not a single buyer said that quality is not important. This is expected. Nobody will admit to wanting poor quality. But quality is also a basic hygiene factor in today’s world. Products have to be good.
  • The only reason why some compromise on quality is price. Price is a tricky one, as people will often say it is not as important as quality. However, when making the final buy decision, price is critical if other parameters are roughly equal.
  • The top rated brands invariably scored high on both, quality of service & product quality.
  • Those who scored highest on service quality were selected the most often. Interestingly, most of these companies were market leaders in their product categories.

While there were many differences in buyer behavior across products or types of end-users, and despite the limitations of such an unstructured approach, the broad theme was intact across products, sectors and geographies!

So, is manufacturing already a service?

Arun Jethmalani

Arun is one of the founders of ValueNotes. Apart from trying to build a high-quality research business, he has spent the last 27 years researching, analyzing, and dissecting companies and industries. He has worked with clients of all shapes and sizes, from all parts of the world – in providing them insights that make a difference to their business.
Prior to ValueNotes, he was an equity analyst/advisor, and wrote extensively on investing – including a column titled “Value for Money” which ran for 10 years in the Sunday edition of the Economic Times. To this day, he remains an avid “value” investor.
He has also been published in several other publications, and is a regular speaker at events related to technology, investing, competitive intelligence, business process management, Internet, etc. See: Valuenotes Events
He has been instrumental in developing a community of research and intelligence professionals in India, and is the founder and current chairman of the SCIP (India) Chapter. Arun holds a B Tech from IIT, Bombay and an MS from Duke University, NC, USA. LinkedIn Profile

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