Customer Training Using Technology-Based Training (TBT)

Contents:
Abstract
Introduction
Service factories
Altering Market and Customer Features
The Rationale of TBT in Customer Training
References



Abstract

The service element is of increasing importance in industrial marketing. Customer training services are one essential part of the services a company provides its customers. The fast developments in information technologies and telecommunications are offering new, radical opportunities to perform well in customer training despite the distance between the company and its customers, if technology-based training is utilised.

Well-designed customer training by training technologies can create an important source of competitive advantage for many companies. This fact is even more crucial at the time when in many industries the market is becoming dominantly global by its nature.

The potential of technology-based training (TBT) for customer training can be summarised in four options. These are the following:
1 TBT can, due to its scale intensity, be produced in large entities cheaper than conventional face-to-face training
2 TBT can be easier tailored to the Human Resources Development (HRD) practices of the customer. It can also be tailored and used in a flexible way by the customers on their own.
3 TBT can be used as one factor in the differentiation of the product especially for customers who recognise the importance of proper training but do not have their own resources to organise it.
4 TBT as a method for customer training allows the company to spread its activities in producing the training material and courses on a global scale.


Introduction

Distance training has been developing fast - and technology-based training, if possible, even faster - in a number of companies in the U.S. and in Europe. Many developed companies, like IBM, Ericsson, Hewlett-Packard, and Allen-Bradley, have been delivering customer training directly to the customer's location as a part of their customer service or have offered the customers access to their training centres.

It is obvious that well-designed customer training by training technologies can create an important source of competitive advantage for many companies. This fact is even more crucial at the time when in many industries the market is becoming dominantly global by its nature. The fast developments in information technologies and telecommunications are offering new, radical possibilities to perform well in customer services despite the distance between the company and its customers.
Customer training is understood as a part of the after sales service which companies are offering their customers. A number of case studies are employed, which demonstrate some of the different functions of customer training by technology-based training, currently in use in the U.S. and in Europe. Companies described in the case studies have been delivering customer training directly to the customer's location as a part of their customer service or have offered the customers access to their training centres.

The emphasis of this study is on customer training. For clarification, the following distinctions are needed (see figure 1):
1 The study refers to industrial markets.Thus the aim is to concentrate mainly on industrial customers. A typical example of such a customer is a company purchasing an office automation system from a vendor.
2 The study concentrates on customer service (mainly after sales service)in industrial markets which are concerned with a physical product. To deepen the previous example of an office automation system, the after-sales activities include, for example, installation, maintenance, and
customer training.
3 The focus of the study is on customer training by technology-based training for industrial markets. Using the example of an office automation system, this would mean customer training delivered by computer-based training (CBT) programs which would be delivered as a part of the system for the purchaser.


Service factories

The different services attached to products have been conventionally seen as an important part in consumer marketing. However, it is also evident that the different services offered by companies are more often the deciding factor in industrial purchasing. In the purchase process of, for instance, information technology, the hardware has not been the main factor in purchasing for a long time. Systems and software have overtaken the hardware in importance. Töpfer defines the new situation in the marketing of technology-intensive products as the period of “solutionware”. He argues that emphasis was first shifted from hardware to software and then further to the creation of solutionware (Töpfer 1991).

Many industries face today a new situation in their activities. For a long time, they have had an understanding of themselves as conventional manufacturing firms, but they are now facing the fact that their main source of revenue is not linked with production but with different services. In information technology industries it has been obvious for years that the financial importance of hardware sales has been decreasing and that system design, software and maintenance are the main sources of revenue and profit. Chase and Garwin forecast that factories will move to service factories. Although the manufacturing remains at the core, the competition shifts from manufacturing to service (Chase and Garwin 1989).

Hardware production is a needed element but not the revenue generator. The focus of companies like IBM has been shifting more towards software, networks, communication linkages, and services as the company's basis for adding value and improving profits (Quinn and Paquette 1990). Quinn, Doorley, and Paquette state that companies in the future will also have a new approach to manufacturing. They will be building their strategies not around products but around deep knowledge of a few excellent core service skills (Quinn, Doorley and Paquette 1990).

Industrial customers are expecting a higher level of service than before as they are becoming more sophisticated. The aggressive management of product support services, as Kotler argues, is becoming the major arena in the battle for competitive advantage. Customer service in particular is an emerging option with which many industrial marketing decision makers have little familiarity as a strategic tool.


Altering Market and Customer Features

Altering Market Features

Many companies no longer have the privilege of defining their own territory on which they compete. International competition is one of the major issues facing companies today. Companies can no longer regard their domestic and international operations as separate ones. The major changes in European markets will create domestic markets in the near future of a totally different scale. In practical terms this means that the international competition in many industries simply does not allow conventional approaches to home markets and export markets. It means as well that companies must get more sophisticated in their conceptualisation of how to achieve and maintain their competitive advantage.

The companies and their scope are changing, but so also is the perceived value by the customers. As many products in a number of industries - to mention only the PC industry as an example - are becoming more similar in their performance, the value for the customer is created by different intangibles. Quinn, Doorley, and Paquette argue that more and more companies are beginning to look like the personal computer industry, where producing the actual “box” is a low-margin activity, and software and service-support activities create most of the product's value for customers (Quinn, Doorley and Paquette 1990).

In high-tech markets the non-tangible product characteristics may prove to be as important or even more important as decision-making criteria as the product features themselves. Shaw, Giglierano, and Kallis (1989) state that in a high-tech purchasing process the vendor-related intangible attributes were often more important than the product performance attributes and that the important vendor attributes are related to the overcoming of uncertainty over future product development.


New Customer Preferences

Customers are becoming more and more time-sensitive, not just price-sensitive, as Normann has stressed. He argues that part of the value attributed to a purchase is the impact that the purchasing activity and subsequent use of the product has on the buyer's time (Normann 1991). Thus industrial customers are emphasising the time factor more than before.

Time-sensitiveness has been increasing due to such production techniques as just-in-time (JIT) production. An effective JIT system requires that each partner in the production chain sticks to the schedule. Delays in any one part have a harmful effect on other parts of the production chain. Potential downtime, caused by whatever factor, is becoming expensive for the customer. Usually it has been considered that downtime is caused by such factors as problems in delivery, installation, or maintenance of products. However, especially in the area of high-technology products, the downtime or ineffective use can even more often be caused by a lack of proper training or guidance (this problem is also discussed in the chapter dealing with Original Equipment Manufacturers (OEMs)).

Time lost due to bad service (like lack of training support) can mean that the delivered product cannot perform properly for a long time. It can mean in addition that when such a crucial factor like training is missing, the product is not feasible for use by the customer.

Training productivity is a crucial question in all industries. Customer training produced by the company as a service can create an important part of the HRD system of the customer. Thus effective customer training can increase the potential linkages between the two units and also increase the commitment between the company and the customer. As Peters argues, training of the customer's employees can become an offensive marketing tool and increase the opportunity to respond more appropriately to customer needs (Peters 1988).

However, as discussed later, effective customer training can also offer great savings in the training expenditure of customers. Companies can enjoy economies of scale in producing training courses and materials, and thus offer different training products at affordable prices for their customers. Many customers of the same company provide identical internal training, for instance, in new equipment operations.


Systems Selling As A Marketing Approach

Customers are themselves becoming aware of the different options and are requiring that they should satisfy their needs with a single purchase. This can lead to new types of purchasing policies by which customers are demanding that hardware, software, and services are part of the deal. However, it is likely as well that many customers are becoming more price-sensitive and are requiring a detailed pricing of the different services offered by the company.

Systems selling has been defined by Kotler as a marketing tool which includes products combined with a number of services and systems contracting including, for example, MRO (Maintenance - Repairs - Operations) activities. The “total solutions” to different problems originate according to him from the U.S. government practices in buying major weapon and communication systems (Kotler 1988).

The systems selling approach offers the customer the opportunity to buy all the needed products and services from or through the same main contractor. However, to be successful, the systems selling approach urges continuous emphasis on customer needs and monitoring of the altering needs of customers.

The reputation of a systems marketer can become the company's greatest asset. Some companies, like IBM, have been able to act effectively as systems marketers (selling not only computer hardware, but also system design, software, services, training etc.) (Page and Siemplenski 1983). Systems marketing can also mean creation of brand loyalty, which can be seen in the use of the same vendors for, for example, system upgrading in computer industries. However, it is not enough just to declare the company to be a systems marketer - reputation as a systems marketer depends heavily on the ability to perform well in all areas.

New possibilities for systems selling are offered as a number of customers realise that their core business is not purchasing equipment, organising internal services, organising training etc., but business performance with the purchased equipment.

Figure 2


Good Service Offers Incentives

Providing good service does not harm the profits of the company. The company can benefit from good service in two ways - by creating short-term financial incentives (with the possibility of collecting premium prices) and long-term strategic incentives (customer commitment and thus long-term relationships).

In many developed products the service offered is the most important factor in the purchasing process. The price of the equipment or the service purchased is of minor importance. Abratt found out that the customers are prepared to pay a premium price for high technology laboratory instrumentation from a supplier which could provide superior technical and after sales service (Abratt 1986).

Thus the real challenge in the future is to satisfy the customer needs not mainly by manufacturing operations but rather by the different service operations of the companies. This is especially due to the fact that the different products of manufacturing operations are of growing similarity and the differentiation is really done by services (see figure 2).



The Rationale of TBT in Customer Training

The potential of TBT for customer training can be summarised in four options. These are the following:
1 TBT can, due to its scale intensity, be produced in large entities cheaper than conventional face-to-face training
2 TBT can be easier tailored to the HRD practices of the customer. It can also be tailored and used in a flexible way by the customers on their own
3 TBT can be used as one factor in the differentiation of the product, especially for customers who recognise the importance of proper training but do not have their own resources to organise it.
4 TBT as a method for customer training allows the company to spread its activities in producing the training material and courses on a global scale.

In the following mainly points 1, 3 and 4 will be discussed.


The Costs of TBT

The main arguments in favour of TBT have been linked with the potential to the reduce training expenditure by the effective use of TBT. However, the cost factors of TBT are many-sided and a number of distinctions and reservations must be made.

The cost-effectiveness of TBT has often been judged on the basis of savings in travel, accommodation etc. However, in companies the main cost factor in training activities is the work time used for training purposes. Thus reduced training time is the most important factor. Kearsley estimates that the time needed with TBT in general terms is 20 - 40 per cent less than in classroom training. Other important factors are the decreasing need of training resources, better availability of training, and often improved job performance (Kearsley 1984).

Bates has elaborated the cost factors in distinguishing between capital costs (purchasing the equipment needed) and recurrent costs (running the training with the help of the equipment, including costs like staff salaries, production or purchasing of materials etc.). The other distinction by Bates is made between the fixed and variable costs in TBT. His conclusions can be summarised as follows:
1 The major costs of using TBT are in production and delivery and hence recurrent, rather than capital.
2 Different technologies vary considerably in their fixed and variable costs.
3 Fixed costs usually far exceed variable costs because production is the main cost (Bates 1989).

For companies planning to deliver customer training by TBT these conclusions have clear impacts. As the main costs are recurrent, companies must make a clear commitment for several years to the delivery of training by TBT. The exit barrier in some services can be high and thus the decision to alter the training delivery system is a far-reaching strategic decision. It must also be remembered that utilising TBT can cause the customers of a company additional costs, such as need to purchase IV equipment, satellite dishes etc.

TBT is regarded as scale intensive. Economies of scale apply often to its products: the more students, the more cost-effective media become (Bates 1989). In large entities in particular, the cost savings can be remarkable. In the U.S. NCR Corp. estimates savings of over $70 million per year in its internal training by using interactive video (U.S. Congress, Office of Technology Assessment 1990).


TBT In Differentiation

Good service offered by any company must be seen as a tool for differentiation. As physical products are becoming more similar in their features, the services are having a growing importance in industrial marketing. The increasing means in differentiation are the different intangibles.

Theodore Levitt has argued that everything can be differentiated. He stresses that the real value of any product or service is the use by the customer. As Levitt argues, the customer attaches value to a product with ability to solve his problems and meet his needs. According to his concept the products or services consist of different layers of performance towards the customer. Levitt calls these layers generic, expected, augmented and potential performance (Levitt 1980).

In differentiation, however, some basic rules should be remembered. There is very little value in useless differentiation. The product or service should not be differentiated if the customers do not want differentiation. And one should not be carried away with the different technologies used for differentiation (Peters 1988). In the process of creating uniqueness by differentiation the major factor is that the company itself is in perfect condition and committed to the process (Kotler 1988).

Customer training services focus should be on finding the best performance of purchased products. Thus training can play an important role in the differentiation of the products. One good example of developed differentiation in practice has been General Electric Medical Services which has been customising its products to customer environments by customer training services and other such services. Thus General Electric Medical Services has been working from the beginning with the concept of augmented products (Kotler 1988).

TBT can be used as an effective tool in the differentiation of the product especially when the activities of the customers are widely dispersed, the internal training potential of the customer is small or the customer does not have access to centres of knowledge.


The Dispersed Production of TBT
The concept of value chain is helping to define how a company that competes internationally is spreading its activities. Conventionally the location of services - including such activities as customer training - has been seen from a strong local point. It has been felt that the main customer interface should be as near the customer as possible to offer him the best possible service. Porter distinguishes the downstream and upstream activities in value chain. He argues that by and large the downstream activities are more related to the customer and thus they are more usually tied to where the buyer is located (Porter 1986)

Porter goes on to argue that the downstream activities which create competitive advantage are largely country specific and that in those activities it is likely that the multidomestic pattern of international competition is more dominant than the global pattern.

However, many recent developments especially in telecommunications and information technology have decreased the importance of performing at the customer's location. Reliable and fast transport systems offer as well new options for the companies to maintain good customer service despite the location of the customer service expertise.

Porter suggests that the company must examine each activity in the value chain to see if there is a competitive advantage to concentrating and/or coordinating the activity globally in various ways. Although this is usually understood to be most effective in upstream value activities, it is obvious that there is great potential also in downstream value activities. Takeuchi and Porter have already discussed thoroughly the possibilities of international marketing in global strategy (Takeuchi and Porter 1986). Centralised customer training activities are first emerging. However, the recent developments in computers and electronic networks allow a model of centralised production and widely dispersed delivery of customer training.



References


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