Servitization - Measuring Value For The Customer To Improve Strategy

Updated: Dec 11, 2019

Some hints how conjoint analysis, quality function deployment and house of quality tools can help assess and adjust the servitization strategy

Measuring value is difficult

It is well known that measuring the value of a product or service is one of the most difficult and complex problems that marketers have to solve.

It is a problem that involves many variables: financial, economic, psychological, emotional, time and so on.

Complexity increases when you move from evaluating the value of a product to evaluating a service, given the intangibility of the latter

In order to be successful, Servitization strategies must be customer centric and therefore must not be exempt from a quantification of the value for the customer, which is fundamental to determine the pricing.

Using the Conjoint Analysis To Estimate The Value For The Customer

The main objective of the conjoint analysis is to determine the preferred combination of attributes and their possible levels related to a product-service, based on the evaluation of a number of proposals that includes different mix of each attribute and their levels, and then to estimate the value, or the utility, behind each combination and the contribution of each level of each attribute that can be chosen. In other words the conjoint analysis starts from the possible product-service configurations.

Based on the customer's choices, and applying mathematical models, it is therefore possible to estimate the level of utility and the contribution of each attribute and of the levels that the attribute manifests itself in the product-service.

It is important to underline that respondents are not asked to give answers about individual attributes and their levels, but are asked to choose between possible profiles, resulting from a priori combinations (or configurations) of the various attributes and their levels. The preferences on individual attributes and levels are in fact estimated from the preferences collected about the entire configuration.

There are many types of joint analysis, each with advantages and disadvantages, particularly when the number of attributes and levels to be investigated increases: Rating-based conjoint; Ranking-based conjoint; Choice-based conjoint.

But here the objective is not to analyze ech method, as there is lot of literature around: our objective here is how to use conjoint for the evaluation of a Servitization Strategy

How to Evaluate and Improve the Servitization Strategy

Conjoint analysis can be used to [1]:

  • evaluate the current state of the servitization strategy,

  • to evaluate improvement actions and a revised strategy

Conjoint Analysis To Evaluate Current State Of The Servitization Strategy

A first application of conjoint analysis is to offer a tool useful to estimate and evaluate the Servitization Strategy in place: it is possible to measure the level of customer satisfaction and the shares of preference for combinations of attributes and levels of the current offer available on the market. The conjoint analysis allow to determine the value ratio of a specific configuration of product-service (the level of customer satisfaction for a specific product-system configuration) and, applying the logistic regression, the competitive positioning of such configuration profile of the product-service measuring its preference share on the market

Improving The Servitization Strategy: Conjoint Analysis, Quality Function Deployment and House of Quality

Conjoint analysis can be used to evaluate how to improve the utility for the customer as a result of a revised strategy:

  • evaluate actions to improve the available offer,

  • verify how a different product-system configurarion with different mix of attributes and levels can increase the utility and value for the consumer

  • how to improve the market positioning.

The product-service redesign, with the objective of increasing the value for the customer and then the market positioning can be carried on applying the concepts of the "House of Quality", a technique first developed in Toyota and part of the Quality Function Deployment process, that allows to link together the product and customer attributes with the relevant technical features that exploit such attributes.

House of Quality

The house of quality is a conceptual map that provides the means for interfunctional planning and communications during the product-service design.Using the House of Quality approach in the product-service desing it is possible to:

  • map the customer'importance for each attribute and level - the level of utility estimated with the conjoint analysis

  • create a correlation between attributes and the product-service technical requirements to provide the functions of the attributes

  • compare it against the offering of competitors

Using such approach it is possible to estimate the cost to improve the product-service-system, and thus to evaluate the impacts on cost, pricing and profits of the revised Servitization strategy.

Results from the conjoint analysis, the product-service redesign with the House of Quality, can then be used to determine the Total Economic Value for the customer used for evaluating the Pricing of the Product-Service-System

Notes

[1] Strategie di Servitization e Valore per il Cliente: Una Proposta Metodologica - Anna Codini - Paper 121 - Università degli Studi di Brescia - 2011


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