Thursday, August 9, 2007

Service Innovation Impact on Process Loyalty

this past March executives from IBM and Oracle founded the Service Research & Innovation (SRI) initiative. Since then this Silicon Valley non-profit has grown and now includes representatitves from leading tech companies including HP, Microsoft and Cisco. Arizona State, the Univeristy of Maryland and the European Commission (the executive body of the European Union) have also joined.

I think some of the reasons for this initiative are:
1. The 10 industries with the most dramatic salary growth in the U.S. are all in the service-providing sectors.
2. The employment in the manufacturing sector is expected to drop 5% by 2014.
3. Goods producing industries will decline to 13% of total American employment in the decade 2004-2014 which is down from 15% in 1994-2004 decade.
4. Service workers now outnumber farmers for the first time.
5. A service-innovation research firm, Peer Insight, noted that the 10 companies they analyzed saw 65% of 2005 revenues from service and yielded 85% of the profits.

A significant point is that consumers now see services as added value to products. This has brought about a remarkable change in business models from the past when many businesses thought that a good product was all they needed to keep their customers happy. The new model tracks the four dimension customer loyalty model I have noted in previous blogs that includes products, services and customer relationships in addition to rewards (which I believe is not a true component of loyalty).

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