According to Peter Drucker’s idea that “performance comes from the outside”, cost reduction and efficiency improvement are still internal behaviors, while the real performance depends on the choice of the outside – the consumers. In this sense, while it is true that retail companies sell products and provide services for business returns, it is the services that really create value.
Service really means doing something for someone else, usually not in the form of physical goods but in the form of providing labor to meet a particular need. In business activities, especially in the retail industry, goods can also be seen as a special form of service, and selecting products for consumers is also service.
Why service is mentioned again
At present, the reason for reintroducing service is that
1. At the macro social and economic level, as the level of economic development enters a new stage, the main contradiction of China’s social development has turned into the contradiction between the people’s growing need for a better life and the unbalanced and insufficient development. The principle of economics also tells us that the service level of a country can reflect the level of socio-economic development of the country as well as its international competitiveness. This shows that the status and role of service economy in the social economy is becoming more and more prominent.
2. At the level of micro enterprises, with the rapid development of digital economy, the traditional products in physical form and services in labor form have become more highly embedded, superimposed and integrated in consumer scenarios. Today, companies are selling more products and services in fusion form, and no longer can clearly distinguish whether it is a product or a service as in the past. In a sense, with the application of advanced technologies such as smart manufacturing and flexible production, as well as the innovation of marketing paradigms such as C2M and reverse customization, consumers are actually seeking services rather than products in their entire shopping journey.
Therefore, we believe that whether it is understanding consumers, understanding the market or understanding business behavior, we need to re-examine the value of services and the role and relevance impact of services in business activities.
After more than 40 years of reform and opening up, China’s product market has become quite mature. China’s home appliance industry has accounted for 80%, 60%, 60% and more than 80% of the world’s output of air conditioners, refrigerators, black appliances and small home appliances respectively; China’s photovoltaic industry has accounted for 60%, 90%, 80% and 80% of the world’s output of polysilicon, silicon wafers, cells and modules respectively; China’s shipments of power lithium batteries have accounted for more than 60% of the world’s output. Whether manufacturing enterprises, commercial enterprises, or intermediate service providers, for product technology, quality, standards, and prices actually have a very clear understanding.
However, enterprises’ understanding and experience of the conditions, attributes and development laws of services as commodities are still incomplete. In the early business practice, many enterprises even just use service, especially after-sales service, as a means to promote their products or as a brand differentiation label. With the intensification of market competition, services also began to be inwardly rolled, and free services were even more prevalent, which also led consumers to naturally believe that services should be free, which is a great misunderstanding of services and a serious devaluation of the value of services.
In a way, it is because of the neglect of service, especially high-quality service, that Chinese enterprises in the creation of the brand lack of value space outside the product itself.
Reconceptualize the value of service
Some products are naturally semi-finished products, and without the intervention of services, their functional properties will not be reflected, for example, air conditioners need to be installed before they can be used. It can even be said that, compared to products, services are a more advanced form of goods, because the demand and supply of the target is more obvious, that is, personalized characteristics, in the specific, targeted service objects spent on time, energy, expertise and intelligence is also more. Therefore, it is only logical that the consumer value of services is greater than that of general products.
Of course, this is only understood in a general sense, and this interpretation cannot be simply applied to the comparison of the value of specific products and services. Ultimately, the value of a good to the consumer depends on a comparison of the elasticity of demand and supply, i.e., on the relationship between supply and demand.
These comparisons are, of course, only rough; in fact, absolute standardized products and absolute personalized services do not exist. Michael Porter has proposed three competitive strategies, among which are the differentiation strategy and the total cost leadership strategy. The differentiation strategy meets the demand for personalized services, while the total cost leadership strategy emphasizes the efficiency of product standardization. Only Michael Porter’s perspective in discussing strategy is still the traditional corporate perspective, and he discusses value patterns with the supply side as the starting point, but essentially, value originates from the demand side.
In the traditional product economy or industrialization era, services were dependent on products, and some special labor services existed only in a few “noble” family lives. Thus, the value of service is mainly reflected in: firstly, it exists as an additional or value-added service to the product; secondly, it exists as the source of a certain product value form. Once the services enjoyed by a few people become fashionable, the demand impulse for standardized products will arise, thus prompting personalized services to be transformed into standardized products with the help of technology.
The reason why it is proposed to reconceptualize the value of services and services is that economic and social development has given rise to a huge demand for services, and the content, form and manner of services have also undergone profound changes at the same time, and it can be said that the era of real service economy has come.
It should be especially emphasized that today’s service economy is no longer an independent economic form corresponding to the product economy, because the service has been deeply embedded in the product. Any enterprise can no longer rely solely on the traditional product economy thinking and market competitiveness, in other words, only to truly stand in the consumer perspective, from the perspective of service to understand the consumer, the product as the basis of service, it is possible to obtain consumer recognition.
The establishment of enterprise service thinking
Determine the service thinking of enterprises, need to break the traditional product thinking model, the establishment of a new consumer-centric service thinking framework. The following points can be learned from.
One, design front and interaction. We can understand the product demand as a static point in time or space for consumers to produce a more single functional demand, while the service demand is a longer process or a broader comprehensive scenario of demand; product demand is explicit, while the service demand is implicit; product demand is relatively standardized and materialized, while the service demand is relatively personalized, with spiritual attributes; product demand are easily agreed upon through rational communication, while service needs often require one party to create a foundation of trust by paying first; the costs incurred by product needs are fixed, while the costs incurred by service needs are uncertain ……
In any case, it is difficult to fully satisfy the increasingly complex service-oriented needs of consumers with a single engineer’s mindset based on technology as the standard. In the era of service economy, companies need to change their design thinking and bring the implicit, potential and uncertain needs of consumers into the management sphere through interactive design fronts with consumers. Design front is not that the service needs of consumers can be solidified by design, but through design interaction, effectively manage the expectations of both sides, and in the process, increase the sense of consumer participation, so that the process of satisfying service needs into a common value creation process for both sides.
Second, process externalization. The traditional enterprise process, which is based on a standardized product system, is concerned only with product quality, cost and delivery time, etc. This internal process cannot meet the needs of service product management. It can be said that the service is a specialized integration process, which needs to extend the management touch to the outside of the enterprise, to realize the process externalization with ecological thinking.
With the deep development of digital technology, the decentralization and virtual reality formed by blockchain and metaverse will make the service scenario more ambitious and the demand change more drastic. Any closed service subject cannot be alone, “the weak water is three thousand, only one scoop”, it needs to be part of the weak water or scoop.
Third, focus on the whole chain of user asset management. Consumers’ time is becoming more and more fragmented, and their service needs are becoming more and more full process, which is the subtlety of the dialectic. It is difficult to meet the fragmented needs of consumers one by one on one time fragment, which is neither realistic nor economical, but we can fully use digital tools to manage the whole chain of user assets and connect them to the service design and service supply. It can be said that without user’s asset management, there is no continuous innovation of future-oriented service products.
Fourth, human capital is the basic element. The technology, skills and techniques of service providers directly affect the quality of services. Consumers’ quality requirements and consumption experience of various service products are ultimately implemented on the specific individual service providers. The service personnel’s technology, skills and techniques performance is all that consumers experience of the brand’s service. Due to the special nature of the service, although there are corresponding processes and standards, the service quality still relies on individual service providers to restore the service standards relatively in the implementation of the service, and is judged by the subjective feelings and experiences of the buyers.
Therefore, in order to improve the quality of service, it is necessary to improve the quality of service providers and invest more in human resources.
For example, the Portman Hotel’s service concept – we serve gentlemen and ladies faithfully with the attitude of a gentleman and a lady! For service companies, this will be an even greater cost. In recent years, the popularity of artificial intelligence seems to have found a way out to reduce service costs, for example, many companies have started to switch their after-sales service hotline to artificial intelligence to answer, and some supermarkets have started to launch various self-service ……
Fifth, business innovation is focused on meeting the spiritual needs of consumers. The demand for services is inextricably linked to the spiritual life of consumers as they move with the times. According to Maslow’s hierarchy of needs theory, people’s basic material needs are a primary demand, which is easy to produce commonality, while people’s demand for spiritual and cultural consumption belongs to the secondary demand, and the demanders will form a greater elasticity of demand due to their respective social environment and the different conditions they have. It can be said that the greater elasticity of demand for services allows the innovative supply of service products with sufficient richness and diversity, which naturally brings huge business opportunities.
The ultimate level of social development is reflected in the perfection of beauty, and the future-oriented business services should let technology play a greater role in the good and aesthetic value.