The good news first: When designing services, an organization can choose from a variety of components and bundle them into one, a few, or many service packages.
The bad news: see above.
Even though tailor-made offers are becoming established for individual customers in some industries (e.g., sports shoe configurators or special-purpose machinery), most companies still face a complex set of decisions when developing or revising their service portfolio: choosing the combination(s) from a multitude of components that deliver the highest value for the addressed customer segments. The fact that most customers want the perfect product for them at the lowest price does not make the task any easier.
To approach this challenge from the perspective of potential customers, many companies turn to market research. Unfortunately, they too often rely on survey techniques with limited information gain:
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Asking customers which service components are important motivates them to name many as very important. We then speak of so-called “expectation inflation.”
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Even methods that deliberately avoid this (e.g., ranking components or constant sum scales) are poorly suited in terms of questioning to determine the relative importance of individual service components in a valid way. For example, the question “Is price more important to you or delivery time?” makes no sense without a concrete reference: small price differences between two offers automatically reduce the importance of price, while with delivery times of two versus ten weeks, this component logically gains importance.
A long-established but surprisingly rarely used survey technique that avoids this problem is conjoint analysis. As the name suggests, respondents evaluate various attributes in combination rather than in isolation. As a result, they are forced to consider trade-offs between offers, just as they would in real purchasing decisions.
Example
A typical question is choosing between the following three vacation packages for a one-week stay on a Greek island:
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5 stars, 200m from the beach, 1,499 EUR
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4 stars, directly on the beach, 1,299 EUR
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3 stars, 800m from the beach, 999 EUR
None of these packages is consistently superior to another. The selection decision is based on the relative importance of the three attributes—star rating, distance to the beach, and price—to the respondent. Their importance is a consequence of the levels shown—if the offers differed in price by only one euro, the importance of the price attribute would be negligible. With significantly larger price differences, the importance would increase.
Based on many decisions like the one above by many respondents, the following questions regarding the configuration of services can be answered:
How attractive are certain service features and their specific characteristics for certain customer groups?
Which combination of service feature characteristics creates the greatest customer value (for which customer groups)?
What service features and characteristics must a product therefore have?
Which ones are less useful?
What is the justified price for this service?
What sales potential do we have at what price?
