Service Economics in the New Digital Y Generation Environment (Summary)

Businesses with past success built upon the quality and innovation of their products may falter if their concept of service (repair break/fix) is only as a support to the manufacturing operation. However if the quality and innovation of product is supported by a similar level of quality and innovation in service, this can provide an excellent way to build and sustain long-term relationships.  Retaining customers means that a reputation has to be sustained over an extended period, and the service aspect of the relationship can provide a bridge should there be a problem with a faulty product. If the concept of service has evolved simply from one of reducing the cost of manufacturing errors, and does not focus on the optimum value derived by the customer from the application of the product, the relationship may not be sufficiently robust to resist a stress. This is best illustrated in figure 1, which shows the effort required to build satisfaction in a product into long-term loyalty. Unless satisfaction and loyalty are high, the value of a customer as a promoter is minimal, but promotion by a customer will have immense value.

                                                    Figure 1

An emerging factor likely to cause a new shift in thinking is the influence of what is referred to as the “Digital Generation”. Social networking systems available through the World Wide Web providing a whole new opportunity for businesses, to create viral marketing and develop customer relationships and communication with search engines able to provide mechanisms of capturing advantage through minimal input – the use of a single word such as “holiday” prompts an advert for low cost holidays on the sidebar of the e-mail going through their system.


                                                    Figure 2

Figure 2 highlights some of the key attributes and observations associated with Generation Y (those born between 1970 and the middle of 1990) and the X generation (born between 1950 and 1970).

 

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