Database Reference
In-Depth Information
In these times of rapid product obsolescence and continual onslaught of superior competitors,
a sustainable competitive advantage can only be obtained through services, such as
◾
Tailor-made designs
◾
Just-in-time logistics
◾
Installation of the equipment
◾
Customer training
◾
Documentation of goods
◾
Maintenance and spare part service
◾
Service recovery and complaints management
◾
Handling of inquiries
◾
Customer-oriented invoicing
◾
Pricing below the market standard
In the
servicized
economy, defined by shortening product life cycles and ever-expanding flow
of competitive goods and services, it is the customer's attention rather than the resources that
is becoming scarce. Giving away products is increasingly being used as a marketing strategy to
capture the attention of the potential customers. A growing number of enterprises are giving
away their products
for free
to attract customers and then charging them for managing, upgrad-
ing, and servicing for uninterrupted availability and usage of the products. Microsoft, after
initially missing the Internet wave, invested massively to come up with a reasonably competi-
tive Internet Explorer (IE) Web browser, but decided to give away this web browser
for free
to
its customers.
Especially in the case of software companies, the cost of producing and delivering individual
product orders is almost zero; hence, if enough number of customers
hook
on to the company's
product and if the enterprise can set its product as an industry standard, it can sell upgrades and
services at significant margins. The more are the number of customers linked together through an
enterprise's program (see note “Metcalfe's Law and Network Effects”), the more are the benefits to
each of the participating customer and, consequently, the more valuable are
◾
The services provided by the enterprise (at much lower cost, because the costs are spread
across much larger installed base of customers)
◾
The attendant long-term relationships with the customer
1.2.2.2 Customer-Responsive Management
The traditional philosophy of management focused on mass production was developed during the
twentieth century. The foundation of mass production is based on
◾
Eli Whitney's concept of interchangeable parts
◾
Ford's development of the production line
◾
Frederick W. Taylor's scientific management
◾
GM and Dupont's cost accounting methods
Mass production management focused on large-scale production and mass marketing of stan-
dardized, low-cost products produced for homogenous markets. Customers are researched