“doing the right things right, step by step”
L. Kok (studentnumber 1063596)
Professor: H. A. Ritsema and D. J. Kiewiet
Groningen, the Netherlands, March 2004
University of Groningen, Faculty of Management and Organization
Preface
This report has been written in the scope of my study Management and Organizations, University of Groningen. I had the opportunity to do a market research for Agfa Gevaert Company, the department of Advanced Professional Services.
I would like to thank Professor Ritsema and Professor Kiewiet (University of Groningen) for their support and feedback in conducting the research and writing my thesis. My sincere thanks are also to F. Cluckers (service development manager Agfa) for his support, comments and the initiation in a world that is called “Agfa”!
I am also indebted to the accountmanagers: T. Kreijns, P. Zwanenberg, C. Wagenvoorde, P. Vangrunderbeeck, F. Coopman and T. Torfs, as they enabled me to conduct the research of interviewing Agfa’s customers.
Last but not least my thanks to my parents for their help in every respect. My brother, boyfriend, friends and colleagues, who have supported me during these six months’ of conducting and finishing the research and this thesis.
Leonie Kok
March 2004
Abstract
The European graphical market is nowadays characterized by low-growth and low-profit margins on products. Service becomes increasingly important to suppliers in acquiring and retaining customers and in generating profit. In this report is addressed how Agfa can generate more service revenues in creating customer value in its prospective services and by improving the current services provided.
Customer value is “doing the right things right”, where right is defined by the customers, in relation to rival offerings. Customer value is assumed to result in more service revenues, as customers are willing to pay premium prices and tend to use a service more over time, if customer value is created in the service. There is also a lower probability that customers will defect. A customer analysis and a competitor analysis are both conducted in this research to find out how Agfa can create customer value in its current and prospective services.
The customer analysis comprises first a consideration of Agfa’s customers’ macro- operating and internal environment as these are of influence on the customers’ service needs. Embedded in this environment, Agfa’s customers in general have the need to produce faster against lower costs, to improve the product quality and to differentiate from competitors. Based on the customer interviews, both improvements for Agfa’s current services and a list of new desired corrective, preventive, additional life-cycle and professional services from Agfa is given. Belgian customers seem to be more cautious in investing in new technologies than Dutch customers. They also seem to attach more value to their relationship with Agfa in comparison with Dutch customers.
In the competitor analysis, the competitors’ current and prospective service products are dealt with. Based on the customers’ ideas for new desired services from Agfa, the competitors’ services are defined as “must-be’s”, “should-be’s”, and “may-be’s” for Agfa’s prospective service range. Agfa does not differentiate nowadays on its current range of services. Agfa’s competitors basically provide the same corrective product- related services to their customers as Agfa does. And beside these services, competitors provide many services, which have not been provided by Agfa yet, but are mentioned by the customers in their ideas for new services from Agfa. These “must-be” services have to be taken into account by Agfa in designing its prospective range of services to remain considered a relevant supplier by the customers in the future.
In further designing Agfa’s prospective service range also the “should-be” and “may-be”
services have to be taken into account by Agfa. These services offer Agfa the opportunity to increase its differentiation potential in its prospective services, assumed to result in more service revenues for Agfa’s service organization.
As a result of the customer and competitor analysis, a list of new services for Agfa’s prospective service range can be presented. As Agfa’s resources are limited, only a couple of all these services are selected for further development and implementation. All the services are screened on both Agfa’s criteria “new”, “profitable” and “feasible” and
the criteria for customer value “willingness to pay for the service” and “importance of the service”.
The following services both meet Agfa’s criteria and are considered to create customer value. These services are recommended to Agfa to be implemented on the short to medium term: color consistency contract, training on the subject color management, remote control and advice for standardization of colors in the production process. These services comprise on the one hand services that have to be implemented by Agfa, in order to be considered a relevant supplier by the customers in the future; color consistency contract, training on the subject color management and advice for standardization colors.
On the other hand is the new service “remote control” considered to be a service on which Agfa can differentiate from competitors in its prospective service range, as none of Agfa’s competitors provide this service. Implementing all these services in Agfa’s prospective service range is assumed to result in more service revenues for Agfa’s service organization.
In implementing and providing the right services “right” to the customers, Agfa is first of all recommended to adopt a global approach in further developing and implementing the new services for Dutch and Belgian customers. This can result in global efficiency and global effectiveness for Agfa. Second, Agfa is recommended to improve its current services in order to build trust in the new services so that these can be sold.
Based on guidelines for creating customer value, Agfa is recommended to take the customers’ expectations into account in further developing and implementing the new services. Third, Agfa is recommended to evaluate the customers’ needs on an ongoing base as customer needs constantly change. Fourth, Agfa is recommended to work together in multidisciplinary teams in further developing and implementing the new services. Everyone in the entire value chain should be involved, and commitment to the new services at all levels of the organization is needed. By taking these aspects and guidelines for creating customer value into account, Agfa is expected to create customer value in its prospective range of services.
By creating customer value in improving Agfa’s current services and implementing the new services in Agfa’s prospective service range, Agfa’s service organization is assumed to generate more service revenues.
Table of contents
Preface ...2
Abstract...3
Introduction ...8
1 Research for company Agfa-Gevaert Group...9
1.1 Introduction...9
1.2 The company Agfa-Gevaert Group ...9
1.3 Background research ...10
1.4 Problem definition ...12
1.4.1 Problem definition and literature review ...13
1.4.2 Services in a business-to-business context ...13
1.4.3 Customer Value...14
1.5 Research Problem...15
1.6 Conceptual model...17
1.6.1 Definitions of words used in the conceptual model ...19
1.7 Sub research questions ...19
1.8 Research instruments and operational research...20
1.9 Research approach and strategy...21
1.9.1 Collecting data for the Customer Analysis...22
1.9.2 Collecting data for the Competitor Analysis ...22
2 Customer Needs and Expectations ...24
2.1 Introduction...24
2.2 The customer’s environment ...24
2.3 Sampling method and representativeness of the sample...26
2.3.1 Reliability ...27
2.3.2 Validity and generalization...28
2.4 Provided services to respondents...28
2.5 The macro environment ...29
2.5.1 Economical ...29
2.5.2 Technological ...29
2.5.3 Culture...30
2.5.4 Educational System...30
2.5.5 The macro environment in relation to the customers’ needs...30
2.6 The operating environment ...31
2.6.1 End-users ...31
2.6.2 Suppliers ...31
2.6.3 The operating environment in relation to the customers’ needs ...32
2.7 Internal environment ...32
2.7.1 Competitive strategy ...32
2.7.2 Increasing competitive capacity ...33
2.7.3 Management systems (controlling systems)...34
2.7.4 Resources and Capabilities (production methods, personnel, capital) ...35
2.7.5 Personnel...35
2.7.6 Production methods...35
2.7.7 Capital investment decisions for the next 5 years ...35
2.7.8 Summary of the environment’s influences on customers’ needs...36
2.8 Customers’ experiences with Agfa’s current service products...36
2.8.1 Improvements for Agfa’s current service products...38
2.9 Customers’ ideas for Agfa’s prospective service products...40
2.9.1 Corrective services ...40
2.9.2 Preventive services...40
2.9.3 Additional life-cycle services ...41
2.9.4 Professional services ...41
2.10 Desired service products ...43
2.11 Differences between Belgian and Dutch customers...45
2.12 Conclusion ...45
3 Competitors’ service products ...46
3.1 Introduction...46
3.2 Data collection method and representativeness...47
3.2.1 Reliability ...48
3.3 Identification of competitors...49
3.4 Services provided by Agfa’s competitors ...50
3.5 Creo’s current services ...51
3.5.1 Services directly provided by Creo (www.creo.com)...51
3.5.2 Creo’s dealers’ current services ...52
3.5.3 Creo’s prospective service products...53
3.5.4 Creo’s must-be’s, should-be’s and may-be’s for Agfa ...53
3.6 Heidelberg’s directly provided current service products (www.heidelberg.com)...54
3.6.1 Heidelberg’s dealers’ current service products ...55
3.6.2 Prospective service products Heidelberg...56
3.6.3 Heidelberg’s must-be’s, should-be’s may-be’s for Agfa...56
3.7 Esko-Graphics’ current service products (www.esko-graphics.com)...57
3.7.1 Esko-Graphics’ dealers current service products...58
3.7.2 Esko-Graphics’ must-be’s, should-be’s and may-be’s for Agfa ...58
3.8 Dealers (Screen, Fujifilm, basysPrint and Lüscher)...59
3.8.1 Wifac’s current services...59
3.8.2 Howgraphic’s current services ...60
3.8.3 MAN-Roland’s current services...60
3.8.4 MAN-Roland’s prospective services ...61
3.8.5 MAN-Roland’s must-be’s, should-be’s and may-be’s for Agfa ...62
3.8.6 Key-Solutions’ current services ...62
3.9 Agfa’s current base of differentiation ...62
3.10 Possibilities to increase Agfa’s differentiation potential ...64
3.11 Conclusion ...66
4 Assessing “new” services...67
4.1 Introduction...67
4.2 Screening the desired new service products ...67
4.2.1 Agfa’s assessment: portfolio management strategy for new service products.67 4.3 First criterion for the Go/Kill decision: “New” ...69
4.4 Operationalizations for the criteria “profitability” and “feasibility” ...70
4.5.1 Costs...71
4.5.2 Revenues...73
4.6 Feasibility...75
4.7 Ratings for new services on the criteria profitability and feasibility ...75
4.7.1 Corrective services ...76
4.7.2 Preventive services...76
4.7.3 Professional services ...76
4.8 Selection of profitable and feasible new services...78
4.9 Criteria for “customer value” operationalized ...79
4.10 Data collection method ...81
4.10.1 Response rate Belgian and Dutch customers...82
4.10.2 Reliability and representativeness...82
4.10.3 Validity and generalization...82
4.11 Customers’ answers: new services for Belgian and Dutch customers...83
4.12 Results: priority-decisions for new services ...84
4.13 Agfa’s prospective service range and potential for differentiation ...86
4.14 Conclusion ...87
5 Recommendations for the implementation ...88
5.1 Introduction...88
5.2 Marketing approach...88
5.2.1 Global services ...88
5.3 Building trust in new services...90
5.4 Implementation of customer value in new services ...91
5.5 Customer value is defined by the customers ...91
5.5.1 Customers’ expectations of Agfa’s overall prospective service strategy ...92
5.5.2 Customers’ expectations regarding the new service performance ...94
5.6 Customer value: the only constant is change...95
5.7 Customer value: involvement of everyone in the entire value chain ...96
5.8 Conclusion ...97
Conclusion...98
References ...99 Appendix ... Error! Bookmark not defined.
Appendix 1 Agfa’s support network ... Error! Bookmark not defined.
Appendix 2 Meaning of words used in the graphical industry .... Error! Bookmark not defined.
Appendix 3 Questionnaire for face-to-face interview ... Error! Bookmark not defined.
Appendix 4 Specific information respondents... Error! Bookmark not defined.
Appendix 5 On-line questionnaire: Agfa’s new services... Error! Bookmark not defined.
Appendix 6 Customer responses Belgium and the Netherlands.. Error! Bookmark not defined.
Appendix 7 Ratings for new corrective services with the scoring technique ... Error!
Bookmark not defined.
Appendix 8 Ratings for new preventive services with the scoring technique ... Error!
Bookmark not defined.
Appendix 9 Ratings for new professional services with the scoring technique .... Error!
Bookmark not defined.
Appendix 10 Responses on-line questionnaire ... Error! Bookmark not defined.
Appendix 11 Scoring technique for customer value ... Error! Bookmark not defined.
Introduction
Agfa Company is nowadays situated in a market that is characterized by low-growth and low-profit margins on products. In this market, “product quality is a fact and price is most of the times not the appropriate base to compete on; service and emotion become essential” (Thomassen, 1998: 68). Service becomes increasingly important to Agfa in acquiring and retaining customers and in generating profit. In this report is addressed how Agfa can generate more service revenues in creating customer value in its prospective services and by improving the current services provided.
In the first chapter, the problem for this research is defined by reviewing strategic management literature about services in a business-to-business context. The research question is: “ Which new services create value to Dutch and Belgian customers and which improvements can be made regarding Agfa’s current services, in order to create more customer value resulting in more service revenues?” The objective is “to recommend Agfa which new services can be implemented in its prospective service range and which improvements regarding the current services can be made, in order to create more customer value, resulting in more service revenues for Agfa’s service organization”. As customer value is defined as “doing the right things right”, right as defined by the customers in relation to rival offerings, both customers and competitors are taken into account in the subsequent chapters.
In the second chapter, the customers’ needs and expectations towards Agfa’s current and prospective services are covered, based on customer interviews. New services and improvements in Agfa’s current service products that are desired by customers become clear, in order to deal with their challenges in the macro- operating and internal environment.
In the third chapter Agfa’s main competitors and their current and prospective service offerings are considered. By taking the customers’ ideas for Agfa’s new services into account, the competitors’ service-products are defined “must-be’s”, “should-be’s” and
“may-be’s” for Agfa. Based on the competitors’ services, Agfa’s current base of differentiation on the range of service products is determined. At the end of chapter three is addressed which services should be taken into account by Agfa in designing the prospective service range in order to create customer value and which services offer Agfa the opportunity to increase Agfa’s differentiating potential.
In chapter four, all the services are assessed on both Agfa’s criteria “new”, “profitable”, and “feasible” and the customer value criteria “willingness to pay” and “importance of the new service”. Based on this assessment, recommendations are given to Agfa regarding the new services that can be implemented in its prospective service range, in order to create more customer value, resulting in more service revenues for Agfa’s service organization.
In the final chapter, recommendations are given to Agfa regarding customer value aspects, in further developing and implementing the new services.
1 Research for company Agfa-Gevaert Group
1.1 Introduction
This chapter starts with preliminary information about the company Agfa-Gevaert Group.
Then the reason for this research is covered. In the last section of this chapter the research problem is defined by reviewing current strategic management literature. Information in this section is based on information derived from Agfa’s website (www.agfa.com) and intranet.
1.2 The company Agfa-Gevaert Group
Agfa was founded in Berlin in 1867. Most people know Agfa as a manufacturer of consumer products such as photographic films, but Agfa offers much more! The Agfa- Gevaert Group develops, produces and distributes an extensive range of analogue and digital imaging systems, services and products, mainly for the graphic industry, the healthcare sector, photography, non-destructive testing of materials and industrial imaging. The company's head office and parent company are located in Mortsel, Belgium. The largest production and research centers are located in Belgium, Germany and the United States. The operational activities are incorporated in 3 business segments that are divided into 5 business groups. The focus of this research is on the business segment Graphic Systems; the commercial printing and packaging market.
Graphic Systems
Graphic Systems provides an extensive range of prepress systems and consumables (plates) for the graphic industry. Agfa is the worldwide number one in prepress solutions and a key player in the newspaper, packaging and commercial printing markets.
Technical Imaging
• Health Care: in the healthcare market, Agfa supplies analogue and digital imaging solutions and an innovative range of diagnosis and communication systems, including computed radiography and digital networks for hospitals. Agfa’s equipment, consumables and services are targeted to different hospital departments and comprise comprehensive information systems tailored to the needs of each hospital.
• Non-Destructive Testing (NDT): Non-Destructive Testing (NDT) guarantees safety, performance and quality. Agfa supplies analogue and digital X-ray film systems and ultrasonic inspection systems that check the structure and tolerance of materials without damaging or deforming them. They are used mainly in aviation, the automobile and railway industry, the energy sector and the petrochemical industry.
• Industrial Imaging: Industrial Imaging is active in several different fields. It provides document management solutions via microfilm and digital systems. Industrial Imaging’s portfolio also contains high-security identification documents as well as various types of film for the movie sector and semi-finished products for electroluminescent lighting and
Consumer Imaging
Consumer Imaging provides photographic products for the consumer market and consumables and equipment for photofinishing labs. Agfa plays a central role in taking, developing and printing photographs and is world leader in high-speed photo printers for industrial finishing as well as in private label films.
Agfa’s mission is: “to strive to be the partner of choice in Imaging, by offering leading edge technology, new ways of working and understanding of the business and individual needs of our customers that goes beyond that of our competitors, with the goal to deliver profitable growth”.
Agfa’s belief is: “to do everything right from the first time in an open management culture”.
1.3 Background research
This research is carried out for Agfa’s business segment Graphic Systems (GS), the department Agfa Professional Services. Agfa GS is situated in a market that is characterized by:
1. Low-growth
Agfa’s customers, printing companies, are merging and working increasingly together nowadays. This is just a first sign of a changing market. It is said that the graphical market, which is characterized by overcapacity will reorganize in the future. This results in a decreased number of printing companies. For the graphical market and Agfa this implies that there are fewer customers to serve. For Agfa it is very important to retain the existing customers and where possible to acquire new customers.
2. Low profit margins on products
Together with this low growth in the graphical market, there are many suppliers besides Agfa who offer identical products for the pre-press environment of printing companies.
This results in a highly competitive market with very low (if any) profit margins on the products sold. Revenues are generated by the provided services related to the products and the plates needed for the pre-press environment.
Agfa’s answer to these market developments is: service! Service:
- to current customers in retaining and where possible acquiring them in this low- growth market, and
- to generate service revenues in a market with low margins on products.
Nowadays Agfa mainly provides product-related services for the engines, processors and workflow sold to customers. An overview of Agfa’s current services is presented in table 1.0. For information how these services are currently provided is referred to Appendix 1, Agfa’s support network.
As is presented in table 1.0, Agfa currently provides corrective, preventive, additional life-cycle and professional services.
Product related services
- Newsletter - E-notification
- Training (on-site and at Agfa Academy)
- Consultancy - System integration - Needs analysis - System redesign Corrective services:
- Hardware telephone support - On-line problem diagnosis for hardware
- Remote support - Intervention - Spare parts handling - Extended warrantee Preventive services
Additional life-cycle services hardware and software:
- Upgrades
Professional Services
Table 1.0 Agfa’s current services
Agfa came up with a new business program called “Orion” (Corporate Communication, 2003:6) to improve the sales and service model. In the scope of “Orion”, Agfa decided to organize the service organization as a separate profit and loss center.
”The service organization has worldwide responsibility for profit and loss in break and fix services and in the emerging Professional Services business” (Agfa intranet, news September 2003).
Agfa’s service organization has to be changed into a global service enterprise and from cost coverage into profit and loss responsibility. Services within Agfa used to be seen as
“the costs of doing business”1.
Agfa’s current strategy for the service organization is (Vangeel J., kick-off meeting, 30 January) at first to deliver quality to the customers in the services provided. Quality is defined in terms of speed, competence and execution. Agfa’s service people should speak the language of the customer, be easy to deal with and offering system support and solutions. Second, cost coverage of the service organization is needed, by having a ground plan, critical mass calculation and process improvement by simplifying the service organization. Additional revenues have to come from Agfa’s Professional Services. Within the service organization mini sales teams are created, which should sell
these services directly to customers. According to Agfa this strategy will result in:
customer satisfaction and profitability (Vangeel, kick-off meeting, 30 January).
Agfa’s service organization’s pursued strategy is by Ramaswamy (1996:98) described as
“a strategic service strategy” with “a strategic service culture”. A strategic service culture is one that is sensitive to customers’ service requirements on the one hand, but on the other hand also recognizes the need for the firm to remain profitable while satisfying these requirements. Agfa’s service managers have to balance the needs of the customers with those of the shareholders and continually make decisions to maintain this balance.
To make the service organization a profit and not a loss center, Agfa wants to know if there are possibilities to extend the current range of services, in particular Professional services as these generate additional revenues, provided to commercial printing and packaging customers in Belgium and the Netherlands. Agfa wants to come up with new service products, besides its current range of services presented in table 1.0, in order to generate more service revenues.
1.4 Problem definition
In the previous sections the reason for this research was given. Agfa wants to generate more service revenues by looking at the opportunities to extend its current range of service products for its customers in Belgium and The Netherlands.
In this section a research model is presented to reflect the sequential steps schematically and visually, which are taken in this research to achieve the research objective: to recommend Agfa how more service revenues can be generated.
Figure 1.0 Research model (Verschuren en Doorewaard, 1995: 46) Literature review
Research objective:
To recommend Agfa how more service revenues can be generated
Operational research and research objects Research instruments
Problem definition &
research questions
The next sections cover: the problem definition by reviewing the literature, the research instruments and the operational research.
1.4.1 Problem definition and literature review
In this section the problem is defined by reviewing the literature. The literature review is based on desk research; literature is collected from secondary resources. A selection is made in strategic management literature, based on its managerial and academic relevance in the scope of this research. Theories about “service”, “customer value” and “business- to-business services” are the central themes in this literature review, derived from strategic management literature: relationship marketing, strategic marketing and business marketing management.
1.4.2 Services in a business-to-business context
Agfa operates in a business-to-business context. The importance of services in a business-to-business context appears immediately in the current literature. The following quotes are just a few of what was found in present literature about the importance of services.
“Service becomes increasingly important nowadays. Product quality is a fact and price is most of the times not the appropriate base to compete on; service and emotion become essential” (Thomassen, 1998: 68).
“Physical products look increasingly similar and are copied easily by competitors.
Suppliers attempt to differentiate from competitors by means of intangible aspects like;
technological knowledge, care taking of the complete installation of the product, training operators and offering attractive finance possibilities. These aspects are decisively for many customers in comparing different suppliers” (Biemans, 2000: 266)
“Today’s companies cannot passively offer products or services to customers. Instead, they must constantly look for innovative ways to better map their offerings to the requirements of their customers. This innovation cannot be carried out by the company in isolation, but requires the partnership of the company, its customers, and its suppliers”
(Ramaswamy, 1996: 8).
Also the European Monitoring Center on Change (2003) confirms the importance of service for suppliers in the graphic sector in general.
“Suppliers will need to focus (like their customers) increasingly on services as much as on selling equipment. This service will be associated with, for example, equipment enhancement and customization, integration with other systems, provision of technical expertise and consulting, training and financial services to support equipment purchase”.
In a business-to-business context the following categories of services can be provided (Biemans, 2000: 275):
• “Corrective services”: these are Agfa’s after-sales services. Agfa provides “break and fix” services like hardware telephone support, intervention etc.
• “Preventive services”: Agfa offers services like back-up creation to protect the produced data.
• “Additional life cycle services”: Agfa offers updates and upgrades services for the customers’ workflow to improve the performance of the products.
Agfa complements this range of services with “Professional services”. These services go beyond the corrective, additional life cycle and preventive services. These services comprise knowledge-based services like training to customers on different subjects and advice for system redesign. For an overview of Agfa’s current services is referred to Table 1.0.
If these are all the categories of services that can be provided in a business-to-business context and Agfa’s current range of service products already comprises all these service categories, “How is Agfa able to generate more service revenues?”
The answer is found in literature about customer value. It becomes clear that not “a new service category” is necessary to generate more service revenues. The answer lies in the fact that customers have to be willing to pay for the provided services by Agfa within the different service categories, which is not always the case for the time being. If customers are willing to pay for many of Agfa’s services, Agfa can generate more service revenues.
1.4.3 Customer Value
If customers see the benefits of the provided service exceeding the total costs, customers would be willing to pay for the service products of Agfa. This is customer value, which is defined as the total benefits of ownership of the product or service less the total costs of ownership (website link 1).
“Customer value” is of a higher order of magnitude than “customer satisfaction” in that it entails doing the right things well. In the parlance of Customer Value Analysis, right is defined as providing value as defined by the customers in terms of both quality and cost attributes (Fleisher, 2002: 184).
If Agfa creates value in its service products to the customers, customers are willing to pay for the provided services and Agfa can generate more service revenues. Revenues represent the value created for the customer, as evidenced by their willingness to pay for the output of the firm” (Wayland et al., 1997: 5).
According to Fleischer (2002: 182) the creation of customer value results in increased revenues, as:
• Customers are willing to pay premium prices for superior customer value in services or products.
• Superior customer value will protect Agfa from losing its most valuable assets through customer defection. Customers that are satisfied around product and service attributes will defect if their goals and motivations are more closely met by rival offerings, in contrary to customers who really value the company’s product and service attributes (Fleisher, et al., 2002: 184). Therefore Agfa’s current objective should not be customer satisfaction but should go beyond:
customer value.
• Customers tend to use a service more over time (website link 2)
The research problem is to find out which current and prospective service products are of such value to the customers that they are willing to pay for these service products resulting in more service revenues for Agfa.
1.5 Research Problem
By reviewing the literature in the previous section, the research problem can be defined, existing of the research question and different research sub questions in order to accomplish the research objective.
The research objective is:
“To recommend Agfa how value can be created to Belgian (Flanders) and Dutch customers in improving Agfa’s current service products and by coming up with new service products which are in line with the customers’ needs, in order to generate more service revenues”.
The research question is:
“Which new services of Agfa create value to Dutch and Belgian customers, and which improvements can be made in Agfa’s current services, in order to create more customer value resulting in more service revenues?”
The focus of this research is to check which new services can be provided by Agfa to Dutch and Belgian customers. In this research only the northern part of Belgium, Flanders, has been taken into account. When in this research is referred to “Belgian customers”, these are customers who are located in Flanders. When in this research is referred to “customers”, both Dutch and Belgian customers are meant.
In conducting this research it appeared that customers gave, besides information for new services, much information about improvements, which could be made by Agfa in its
value” in order to generate more service revenues for Agfa, information regarding improvements of Agfa’s current services is taken into account in this report too. In contrary to information about new services, this information is not analyzed in depth as Agfa recently started a research how Agfa’s services can be improved2.
2 Interview with A.Claes and M.Claes
1.6 Conceptual model
To visualize the research problem, a conceptual model of the problem is presented in figure 1.1. The central topic in this research is “customer value creation”.
Agfa’s range o f services
A gfa’s p ro sp ective range o f services
C usto mer Value creatio n
Agfa’s S ervice Revenues +
+
+ C o mpetito rs’
current and p ro sp ective services Agfa’s value chain
Agfa’s criteria
O p p ortunities to create C usto mer
Value
C usto mer value criteria
End - users’
exp ectatio ns and needs C usto mers’
current and future need s
and exp ectations
O p erating enviro nment Internal
environment
M acro - enviro nment
Imp roving
current services N ew services
In the conceptual model is shown that the connection between Agfa’s value chain and the customer’s value chain offers opportunities to create customer value. The term connection is used to suggest alignment of buyers and sellers, the point at which these parties make the right connection and act almost as one to create mutually the greatest possible exchange of value through their relationship (Wayland, 1997: 13). In connecting Agfa’s value chain to the customers’ value chain, Agfa has to come up with a prospective service product range that fits perfectly within the customers’ needs.
As this is a research in a business-to-business context, most of the times Agfa’s customers are not the end-users of the product. Agfa’s customers on their turn have to fit in with their end-users’ expectations and needs in their operating environment. Besides this operating environment, the macro- and internal environments are of influence on the customers’ needs and expectations regarding Agfa’s services as well (Mühlbacher, 1999:
50).
In the model is shown that competitors have been taken into account as well. The reason for this is that the customers’ expectations and needs regarding Agfa’ service products are influenced by the competitors’ service products; customers determine the value of a products or service in relation to rival offerings (Fleischer, 2002: 189). Competitors are also taken into account to find out if Agfa is nowadays differentiating on its services and if there are possibilities to differentiate in the prospective service range in order to generate service revenues.
Based on Agfa’s customers’ current and prospective needs and expectations, opportunities arise for Agfa to create customer value in its current and prospective services. Opportunities arise for Agfa to improve current services as well as coming up with new services in order to align Agfa’s current and prospective services with the customer’s value chain.
The opportunities, derived from the customers’ needs and expectations, can be translated into ideas for new desired service products. Based on these ideas, Agfa is able to design a prospective service product range consisting of improved current and new service products, which are determined in close relation to the customers’ needs and expectations. In determining Agfa’s prospective service product range, criteria from both Agfa (profitability, feasibility and “new”) and the criteria for customer value (importance and value) will be used to evaluate all the desired new service products. Based on this evaluation a selection is made in the desired service products. The services that meet the criteria are recommended to Agfa to be implemented by Agfa in its prospective service range. As a result of really involving the customers in the research, Agfa’s prospective service range is assumed to create value to the customers by perfectly meeting their most important needs and expectations. Customer value, where the total benefits of ownership exceed the total costs of ownership, will result in more service revenues for Agfa.
Customers are assumed to be willing to pay for the extra benefits provided in the services, together with the likelihood that the customers will be retained and use a service more over time.
1.6.1 Definitions of words used in the conceptual model
• Agfa’s current service products range: comprises the “corrective”, “additional life-cycle”, “preventive services” and “professional services” as presented in table 2.0, chapter 2.
• Opportunities: “any favorable current or prospective situation in the organization’s environment, such as a trend, change, or overlooked need that supports the demand for a product or service and permits the organization to enhance its competitive position” (Fleisher, 2002:99).
• Customer value: “the value created to the customer, as evidenced by their willingness to pay for the output of the firm” (Wayland, 1998: 5). “Value as defined by the customers in terms of both quality and cost attributes”. The total benefits of ownership of the product or service exceed the total costs of ownership (website 1).
• Customer: commercial and packaging printers who use either one or more of Agfa’s products (4-up, 8-up or VLF format engines and processors and/or workflow) for their pre-press environment or similar products from Agfa’s competitors.
• Competitors: organizations that provide processors, engines and/or workflow support for the pre-press environment to the commercial printing and packaging market in the Netherlands and Belgium.
The meanings of words, used in the Graphic industry, can be found in Appendix 2.
1.7 Sub research questions
In the conceptual model three main aspects are presented that have to be considered in order to answer the main research question: customers, competitors and Agfa.
At first it is important to find out the customers’ needs and expectations towards Agfa’s services in order to create customer value. Customer value is “doing the right things right”, right as defined by the customers (Fleisher, 2002: 184). The customer’s environment influences the customer’s needs and expectations regarding Agfa’s services.
Therefore, the customer’s environment has to be taken into account in researching the customer’s needs and expectations. This leads to the first sub question, which will be answered in the next chapter.
1. “Which new service products and improvements in Agfa’s current service products are desired by customers in order to meet the current and future challenges in their macro-, operating and internal environment?” (Chapter 2) Also Agfa’s competitors have to be taken into account. As customers define customer value in relation to rival offerings, it is important to find out the competitors’ current and
range and if there are possibilities to increase the differentiation potential. It is assumed that differentiation in Agfa’s service range leads to higher margins on services, resulting in more service revenues for Agfa’s service organization. The following sub questions will be answered in the third chapter.
2. “Which of the competitors’ current and prospective service products can be considered to be “must-be’s”, “should-be’s”, and “may-be’s” for Agfa?” (Chapter 3)
3. “Based on the competitors’ services, is Agfa nowadays able to differentiate on its current service range?” (Chapter 3)
4. “Which services should be taken into account by Agfa in designing the prospective service range in order to create customer value and which services offer Agfa the opportunity to increase Agfa’s differentiating potential?” (Chapter 3)
Based on the customers’ needs and expectations regarding Agfa’s services and the competitor’s current and prospective services, Agfa’s prospective service range can be designed. Services that meet Agfa’s criteria and the customer value criteria are recommended to Agfa to implement in its prospective service range. This leads to the following sub question that will be answered in chapter 4.
5. Which new services are recommended to Agfa to be implemented in Agfa’s prospective range of services, based on Agfa’s criteria and the customer value criteria, in order to generate more service revenues for Agfa? (Chapter 4)
In order to create customer value in the further development and implementation of the new services, recommendations regarding customer value aspects have to be given to Agfa. This leads to the fifth sub question that will be answered in chapter 5.
6. What kind of aspects regarding customer value has to be taken into account by Agfa in implementing the new services in its prospective service range? (Chapter 5)
The previous sub questions will be answered per chapter. In the chapter itself, the sub question is divided in a number of “sub sub” questions to deal with the sub question.
Research Conditions:
• The research results will be communicated in March 2004
1.8 Research instruments and operational research
In this section the research strategy is the central theme. Which research instruments are sufficient in tackling the sub questions of the research problem and what are the implications of these research instruments for the operational research that has to be done?
In tackling the first sub research question, a customer analysis will be used as research instrument. The purpose of this customer analysis, whereby the customers’ macro-, operating and internal environment have been taken into account, is that Agfa can determine what the customers’ current and prospective expectations and needs are regarding Agfa’s services. This way, Agfa can determine in which part of the customers’
value chain can be created more value, as defined by the customers. Based on this analysis, the customers’ ideas for new services can be translated into new desired service products.
In tackling the second and third sub research questions, a competitor analysis is a relevant instrument. The strategic rationale of a competitor profiling is that superior knowledge of rivals, offers a legitimate source of competitive advantage (Fleisher, 2002: 149). By conducting a competitor analysis, Agfa can find out which services the competitors are offering nowadays and will be offering in the future. The competitors’ service products influence Agfa’s customers’ expectations, needs and the value of Agfa’s service.
Therefore competitor knowledge has to be an intrinsic component of corporate strategy (Fleisher, 2002: 149). In conducting a competitor analysis, also the degree in which Agfa nowadays differentiates on its current range of services can be determined.
1.9 Research approach and strategy
The operational research depends upon the chosen research instruments in answering the research questions. As is discussed in section 1.8, a customer analysis and a competitor analysis are the research instruments that will be used in this research. In this section the research strategy and data collection methods are discussed regarding the research instruments that will be used.
In the scope of this research some general theories are known about customer value creation, but no theories exist which way customer value could be created by Agfa in this specific research context. Therefore at first the inductive approach is used in this research (Saunders, 2000: 87). Data is collected by researching a number of specific cases. This collected data is used to develop a general theory about customer value creation in Agfa’s specific context. By using a deductive approach at the end of the research, the theory about customer value creation is tested in practice (Saunders, 2000: 87).
The research strategy that is employed is a “case study”. A case study is defined as the development of detailed, intensive knowledge about a small number of related cases (Saunders, 2000: 94). A number of customers with their expectations and needs will be taken into consideration in this research. The study of these cases will be done in November and December and is cross-sectional; “the study of a particular phenomenon at a particular time” (Saunders, 2000: 96). The purpose of the research is “to explain the relationship of Agfa’s prospective service range with the current and prospective customers’ needs and expectations in relation to customer value”. This research has an explanatory character (Saunders, 2000: 98).
1.9.1 Collecting data for the Customer Analysis
Mainly primary data will be collected by interviewing customers, using questionnaires, as customer value is “value as defined by the customers”. In collecting data by using questionnaires, each customer is asked to respond to the same set of questions in a predetermined order (Saunders, 2000: 278).
At the beginning of the research, data is collected by having face-to-face structured interviews with Dutch and Belgian customers by using a questionnaire with open questions, which can be found in Appendix 3. Specific information about respondents can be found in Appendix 4. Mainly qualitative data is collected this way.
At the end of the research, data is collected by sending a self-administered on-line questionnaire with ranking questions to the same Dutch and Belgian customers, to verify the qualitative data collected (Saunders, 2000: 280). This way quantitative data is collected. The on-line questionnaire can be found in Appendix 5. The advantage of using both a qualitative and quantitative approach (multi-method approach) is that it enables triangulation to take place: “the use of data collection methods within one study ensures you that the data are telling you what you think they are telling you” (Saunders, 2000:
98).
Due to time- and budget constraints, sampling was needed in this research. The sample frame exists of: “all of Agfa’s Dutch and Belgian account managers’ customers in the Netherlands and Belgium operating in the commercial printing and packaging market, who currently use or have used Agfa’s products and services for the pre-press environment directly from Agfa (no dealers are involved) or use competing products for the pre-press”. For specific information about the concerned account managers is referred to Appendix 4. From this sample frame, Agfa’s account managers selected twenty customers who were willing to participate in this research; “purposive or judgmental sampling” (Saunders, 2000:176). The sample exists of:
• 14 Customers in the Netherlands who use products of Agfa or competing products for the pre-press in the commercial printing and packaging market
• 6 Customers in Belgium (Flanders) who use products of Agfa or competing products for the pre-press in the commercial printing market
The focus of this research is on the commercial printing customers as Agfa focuses on this customer group with new services.
1.9.2 Collecting data for the Competitor Analysis
The competitor analysis is conducted by collecting primary and secondary data. By having structured interviews with customers, who use competing products for the pre- press environment, primary data is collected. Primary data is also collected by having conversations with several account managers and by being present at several sales meetings. Account managers visit their customers on a daily base and are an important source of information (Biemans, 2000: 116). According to Fleisher (2002: 151) account
managers and customers are “the most valuable sources of information regarding the identification of both current and potential competitors”.
Secondary data is collected by analyzing annual reports of the competitors and by consulting the websites of the competitors.
In figure 1.2, an overview of the research strategy is presented.
Figure 1.2 Overall research model
In the next chapter the research instrument “customer analysis” will be put into practice.
It will become clear what the customers need and expect from Agfa’s current and prospective services.
Problem definition:
“Which service products create value for Agfa’s Dutch and Belgian customers that can be fulfilled by Agfa in making improvements in the current service products and by coming up with new service products, in order to create more customer value resulting in more service revenues?”
Literature review:
- Strategic marketing management literature:
Business-to-Business Marketing, Customer Relationship Marketing, Product development
Research objective:
“To recommend Agfa how value can be created to Belgian and Dutch customers in improving Agfa’s current service products and by coming up with new service products, which are in line with the customers’ needs, in order to generate more service revenues.
Operational research:
- Face-to-face structured interviews and self-administered questionnaires Research objects:
- Agfa’s Dutch and Belgian customers - Agfa’s competitors in Belgium and the Netherlands
Research instruments:
- Customer Analysis - Competitor Analysis
2 Customer Needs and Expectations
2.1 Introduction
In this chapter the customer needs and expectations regarding Agfa’s services are determined. These are defined by conducting a customer analysis in having structured interviews with customers in both the Netherlands and Belgium.
The following sub question “Which new service products and improvements in Agfa’s current service products are desired by customers in order to meet the current and future challenges in their macro-, operating and internal environment?” will be answered by dealing with the following questions:
1. What are the current and prospective needs and expectations of customers regarding Agfa’s current and prospective service products to deal with their internal, operating and macro-environment?
a) Which improvements in Agfa’s current service products do customers desire?
b) Which ideas have customers for new desired services from Agfa?
2. Which opportunities arise from these current and future customers’ expectations and needs for Agfa regarding its new service products?
3. Do Belgian and Dutch customers differ from their needs and expectations regarding desired new service products?
2.2 The customer’s environment
Customers who have been interviewed for this research (managing directors, technical managing directors and pre-press managers) can be seen as the decision makers in the company. They make the decision to buy a product or a service product from Agfa. This decision maker lives in the firm’s internal environment, which is embedded in the operative environment of the company, which in turn is surrounded by the macro environment (Mühlbacher, 1999: 50). All these environments exert influence on the customer’s needs and expectations regarding Agfa’s service products. In particular the operating and internal environment are of influence on the customer’s decision to buy Agfa’s services. Agfa’s customers are able to influence the operating environment in managing the relationships with its most important stakeholders in this operating environment (Mühlbacher, 1999: 50). Customers’ needs, expectations and their buy- decision regarding Agfa’s services for their internal environment, will reflect the customers’ need to manage these relationships with its most important stakeholders. For example Agfa’s customers, who want to produce the products faster and with higher quality to keep their customers satisfied, are assumed to need and buy Agfa’s services to accomplish this.
In contrary to the operating environment, Agfa’s customers are restricted in their influence on the macro-environment (Mühlbacher, 1999: 51). By buying and using Agfa’s services, the customer is not assumed to be able to influence the aspects in the macro-environment; economy, educational systems, technology and culture. The macro- environment has been taken into account, as Agfa has to be aware of the fact that the
customer is surrounded by this macro-environment and that this environment is of influence on the customers’ needs and expectations regarding Agfa’s services. It would not make sense if Agfa came up with new services that are not in line with for example the current technological developments or the culture, in which the customer is embedded by the macro-environment.
By subsequently looking at the different layers of the customer’s environment, insight is gained about the context in which Agfa’s customers are currently operating. The effects of this context on the customer’s general needs and expectations regarding Agfa’s prospective services become clear. Then there will be zoomed in on the specific customers’ needs regarding Agfa’s current and prospective services in considering the customers’ answers on the question “which prospective services should be provided by Agfa”. By first analyzing the customers’ environmental context at a high aggregation level, the specific customers’ needs regarding Agfa’s current and prospective services on a lower aggregation level, can be better understood. Agfa’s current and new service products should fit perfectly with the customer’s needs in order to create value to the customer.
Agfa’s service range
End-users’
demands and unmet needs Agfa’s value chain
Customers’
demands and needs
O perating environment Internal
environment
Macro-environment
Figure 2.0 Customers’ expectations and needs
