Purpose – Most business leaders buy into the logic of differentiating their products from those of competitors, and of offering more complete solutions to customer needs. But what if you find that other competitors with stripped‐down offerings are gaining share? Does that mean you should abandon efforts at differentiation and switch to a simplified, low‐cost product? If so, what should you do about customers who say they like the more complete, higher‐value offering? In this column, Stuart Jackson considers a number of examples where companies have disaggregated their service offering to create a menu of options that appeal to a wide range of customers. The author then proposes four key questions for companies considering going down this path. Design/methodology/approach – In this article, Jackson considers service disaggregation strategies for companies in a number of different industries, including retailing, airlines and software. Jackson then draws lessons that can be applied broadly across any business considering tiered levels of services and pricing as a new source of profitable growth. Findings – Most companies want to offer more complete solutions to customer needs with all sorts of added features “built‐in”. This makes sense only as long as the large majority of customers really value all these features. If not, companies should examine ways to disaggregate their service offerings and broaden the range of their customer appeal. Originality/value – By looking in detail at when taking away product features or charging more for specific services does or does not make sense, this article provides valuable insights into how to understand and predict when changes in service offerings will support increased competitive advantage and value creation.
Journal of Business Strategy – Emerald Publishing
Published: Sep 5, 2008
Keywords: Business development; Value‐in‐use pricing
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