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Services do better when they cluster together

Service blends and bundles: Because services map to increasingly demanding customer preferences, companies must find ways to create them in ever-more-granular bundles.


Take insurance, for example. Even though insurance is a service, in many ways it is sold like a product. A product-dominant mindset says “we sell life insurance, car insurance and homeowner’s insurance. Our customers come to us when they need insurance.”


But if a company can find a way to offer insurance as a complex, configurable service, a lot more options open up.

For example, consider Whipcar, a service that allows car owners to rent their car out when they are not using it. Part of the Whipcar service involves bundling car insurance along with the rental, which requires the “insurance service” be available on demand in increments as small as one hour.


Service blends such as Whipcar’s are easier to create when companies can easily link them together. The more networked and linkable a service, the more easily it can be blended and bundled with other services.


Consider PayPal, a payment service which is easy to plug in to any ordering system. Some of PayPal’s customers are so happy with the service, and so loyal, that they will not buy from merchants who don’t offer PayPal payment service. After all, buying from another vendor is usually just one click away. Service networks also thrive by making a set of complementary services more easily available to customers. A restaurant does better if it’s within a short walk of a movie theater and shopping.


Customers tend to like convenient clusters of services. For example, it’s nice if you can go grocery shopping, drop off your laundry and get a coffee in a single stop or within a short distance.


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Taken on October 30, 2011