Service Segmentation

 

While reading today, I came across the following comment:

Is a high service level necessarily bad? No. However, if your service levels do not vary by type of customer or if your customers are not willing to pay for better service, you are potentially over servicing your customers. Our experience across industries shows that companies seldom segment their service offerings, thereby allowing all of their customers access to the same high level of service.

While working in the food industry, responsible for the organization's direct delivery (B2B), this topic was an area that we started to explore more and more. 

One comment from a former peer who I respect greatly was that, in logistics, you can do anything as long as you are willing to pay for it. This was true then and it remains true to this day.

As you begin to optimize and improve your operations, you soon realize what you are actually providing to customers. You look at what you have to do, what your processes are, what are the levers that make your system work.

Then you realize (as the quote above highlights) that most of the time, everyone is getting the exact same product / service / promise, irrespective of what they are paying. For most businesses, their operations are like a manufacturing machine ... it's either on or off. In large scale modern manufacturing, you produce the same thing with no differentiation in order to maximize the economy of scale. This bleeds into other areas of the business.

Another factor that usually weighs in is that people are uncomfortable thinking that one customer gets something 'more' than another; remember, every customer is important. The truth is however, that not every customer contributes the same way back to your business. I am not advocating to create / favour one customer over another simply because you like them more; the idea with segmentation is that you curate the right service level for the customer's needs and budget.

You will find that most of the time, you can establish a strong and broad standard level of service that applies to the majority of your customers. Some customers may required much higher levels, while others will benefit from a more basic offering based on their own needs.

Creating the right type of segmentation gives you the ability to offer different tiers of service that better match each customer's needs, it improves your businesses revenue and profitability, allowing you to continue to grow and invest back into the business.