Business model evolution of customer care services
Journal of Industrial Engineering and Management
JIEM
2013-0953
Business Model Evolution of Customer Care Services
Jukka Majava 0
Ville Isoherranen 0
0 University of Oulu , Finland
Purpose: Servitization is a rising trend as companies look for new revenue streams. This paper presents a study of customer care business model evolution in the smartphone industry. The paper identifies key changes in the business models during recent years and their implications for companies seeking after-sales service excellence and new revenue sources. Design/methodology/approach: The research approach is built on the literature of product-service offerings, servitization, and business models. The empirical part is based on a case study of former Nokia mobile phone business, the Apple iPhone, and Google Android. Findings: Three different customer care business models and an analysis of the changes in the smartphone industry are presented. This paper demonstrates how after-sales services have become increasingly important in generating new revenue. Moreover, the nature of after-sales services has fundamentally changed in the industry. Research limitations/implications: Due to the careful selection of the cases that represent the studied industry well, the results provide valuable insights for practitioners and researchers involved in developing after-sales service offerings in the mobile industry. However, a case study research approach may not offer a generalized picture of this phenomenon in other industries. Originality/value: A novel analysis of customer care evolution in the smartphone industry is presented. In addition, the study demonstrates that applying the concept of business models to after-sales services provides new insights into these services and their roles in business.
customer care; after-sales; business model; services management; operations management; servitization
1. Introduction
The increasing servitization of business has become a global trend; companies are having to look for new revenue
streams since global competition has decreased the margins of a purely physical product-based business (Oliva &
Kallenberg, 2003; Tien, 2015). In addition, service quality has become increasingly important in many industries
(Roy, Lassar, Ganguli, Nguyen & Yu, 2015). In the past, many companies used post-sale customer services solely
for warranty cost and reverse logistics cost minimization and these services were not seen as an opportunity for
revenue generation. Warranty cost and reverse logistics cost optimization have been extensively studied in the
academic literature
(e.g., Balcer & Sahin, 1986; Kim & Rao, 2000; Chattopadhyay & Murthy, 2000; Pellicer & Valero,
2018)
. Warranty related services were, in many cases, outsourced to an external cost-optimized service network and
they were not seen as a core activity by businesses
(Majava, Harkonen & Haapasalo, 2015; Majava & Isoherranen,
2016)
. However, traditional product-centric business models are now challenged by new product-service offerings,
and in many cases these new, more complete, offerings are winning. Thus, product-based firms need to quickly
learn and develop new ways of developing their business, that is, their business model in customer care services
must be revisited.
This study examines the smartphone industry, where extreme global business competition and fast technology
cycles create an interesting research environment
(Isoherranen & Kess, 2011)
; many new phenomena and their
effects can be examined in this space first. New products and services need to be brought to market rapidly, and
typically in the digital business, the fastest takes it all, grabbing the highest market and profit shares. The time to
market is therefore of essence. From the news that have been seen in the business world, these fast market
introductions also have customer care related risks. An example of this the Samsung Galaxy Note 7 battery case in
2016, which eventually led to shutting down production, recalling products, and creating lasting damage to the
brand and customer experiences. All of these resulted in high losses for the company.
During recent years, customer preferences have changed in the mobile phone market
(Haverila, 2011)
, which has
made the business more dynamic. Today?s customers are more willing to accept that a product can have software
issues, tolerate frequent updates, and understand that the product may break when it is dropped. Self-service using
discussion forums or interacting with customer service agents or chat-robots through chat are standard practices
among companies. These new preferences, along with rapid technology evolution, have created disruptions of the
traditional product-centric business models. And at the same time, this provides agile companies with new business
opportunities. Digitalization opens zero-cost opportunities to interact with customers by using new tools (i.e.,
WhatsApp, WeChat)
(Ibrahim, Ros, Sulaiman, (...truncated)