Wednesday, October 18, 2017

Degrees of Service Experience

One of the distinguishing characteristics of a firm is the degree of service it provides.  A customer seeks a given benefit from interacting with a firm, and the specific type of benefit he seeks dictates the degree of service he will seek.  Choosing the degree of service is a significant strategic decision that determines the kind of customers a firm serves, the types of competitors it has, and the manner in which it will seek to obtain and retain clientele.

First Degree: Making Things

The first degree of service consists of providing things to the market, and as such it is almost exclusive to the manufacturing of goods rather than the provisioning of services, though entertainment experiences tend to be a “thing” unto themselves with no functional purpose.    Even goods at this degree are rare: because the product is the thing itself rather than any benefit to be derived from employing it for an ulterior purpose, first-degree service in manufacturing is limited to objects d’art: items that are owned as curiosities to be looked upon but never used in any significant manner.

It is entirely possible for an activity to begin as a non-commercial enterprise that eventually finds a greater purpose.  For example, scientists, engineers, and inventors are often fascinated with the task of creating a thing for reasons that have nothing to do with any practical use – and it is when someone else finds an application for their bizarre creations, it becomes a viable commercial product for employment in providing another level of service.

Second Degree: Facilitating Tasks 

The firm that provides the second degree of service concerns itself with a task that its customers are interested in performing, but doesn’t give much attention to why they are performing that task or what they mean to achieve.    Distressingly many firms seem inappropriately focused on the second level of service – providing the fastest, strongest, or best widget that can be used to perform a certain task more efficiently or effectively, but not caring much what that task happens to be.

This is not necessarily a bad thing: material and component manufacturers often pursue some esoteric quality in the things they produce, leaving it to their commercial customers to find applications that include their products as components.   A highly fuel-efficient engine is of no value in itself, but when someone installs it in a vehicle, the benefit of its efficiency translates into something meaningful for a user.

Third Degree: Serving Purposes

The third degree of service begins with the notion of purpose: the customer is attempting to achieve an objective by performing a task, and the firm provides a product, be it good or service, that enables the customer to obtain that objective – more efficiently, more effectively, or at all.  

Very often, the customer may have no sense of what tasks he must perform in order to achieve his objective until he encounters the product.  The firm may educate him in the use of their products, or the product itself may be so intuitive that the customer is able to recognize the purpose it serves without explicit instruction.

Fourth Degree: Fulfilling Needs

When a firm seeks to fulfill customer needs, it tends to depart from manufacturing goods and focus on providing services.   The customer in this instance is not aware of what tasks must be performed nor of the purposes of the tasks themselves – and he may be entirely indifferent to what is done to fulfill his ultimate need.

Firms that provide this degree of service often consider themselves to be full-service firms or claim to provide a turn-key solution in which the customer remains entirely hands-off in the process of need fulfillment.  Aside of making payment, it requires no effort on the part of the customer to achieve the fulfillment of his needs.

Fifth Degree: Autonomous Service

The fifth degree, and the highest of which I can currently conceive, is the firm that provides autonomous service.   It does not merely determine how to fulfill the need, but defines the nature of the need itself.  In such instances, the customer may be only vaguely aware that he is lacking something, or that something can be done to improve his situation, and leaves the management of his affairs entirely in the hands of the autonomous servant.

Such services are generally accessible only to the wealthy, as they provide a high level of expertise and an intense level of engagement by the service provider.   There have been various attempts at the use of artificial intelligence to stand in for human expertise in providing autonomous service, but I cannot think of a single one that has achieved any appreciable degree of success.

Afterword: Choosing the Right Degree

As I began this meditation, I was using the term “levels,” but along the way I came to recognize that this was wrong- or at least it implies the wrong thing.  The word “level” implies degrees of advancement, and that everyone should evolve to provide the highest level of service – but this is not correct.

The customer desires a given degree of service, and each individual may seek service to a different degree depending on the nature of the benefit he seeks to derive.   A person who enjoys gardening, for example, doesn’t want a fifth-level service in which everything is done for him.  He is likely to want a third-level service, in which the task is facilitated but he does most of the “work” himself, because he enjoys engagement in the activity.

Wednesday, October 11, 2017

Why You Should Never Ask For Referrals

Word-of-mouth seems to be back in fashion, as I’ve recently read a handful of articles on the topic of getting referrals from customers.   And to my way of thinking, the advice that’s being promulgated is dead wrong.   That is, I’m seeing advice to ask customers for referrals right away, upon closing the sale, and providing them with incentives for their next purchase if they send the firm any business.

What makes that advice so wrong is that it is usually far too soon to expect a customer to make a referral: he has just purchased a product, has yet to try it out, and does not know whether he is actually happy with the outcome.  Being pressed immediately to tell others about his experience with a product he hasn’t even take out of the box is inappropriate and uncomfortable. 

What makes word-of-mouth so powerful is its raw honesty.   When a person tells another person about their success with a brand, the person they tell receives this as legitimate and trustworthy information that is well-meant, because the person who is telling them this is concerned for their welfare and is not seeking anything for himself by passing along the information.

So it should be immediately evident that offering customers a premium or discount for spreading the word is immediately harmful to their integrity and the value of their recommendation.   If the person to whom they are promoting the brand knows about this, the integrity of the referring party is called into question – and they certainly will learn of it when they purchase and the brand makes them the very same offer of a benefit to promote to their friends and neighbors.

Even suggesting to a person that they ought to advocate for the brand is an affront to their integrity: they will decide, on their own, whether their experience is worth sharing.  A person who gives a referral is staking their personal reputation on the outcome to others, generally those with whom he has some manner of relationship.  The degree to which he values that relationship governs his likelihood of recommending a brand to the other party – thus an attempt to cajole a person into referring others is interfering in their personal choices, their personal relationships, and their personal brand.

In all, there is likely no proper time and no proper way to ask others to advocate for the brand, and word-of-mouth is entirely out of the brand’s control – but for one thing: a brand can earn word-of-mouth by actually delivering value to the customer.   Customers will give referrals when they are ready, and not sooner.

Wednesday, October 4, 2017

Types of Organizations

This may be a topic I’ve covered before – I vaguely remember it but can’t find the post – but I have had several conversations lately about the differences between business, charity, and government organizations.   And when I find myself having redundant conversation, it’s fodder for the notebook.


An organization is created to achieve a benefit for someone, but only if there is a need for the participation/contributions of more than one person.  Where one person is capable of doing something, he does it himself. 

It is also generally true that an organization is created when there is an ongoing need.   There are some ad-hoc organizations that disband as soon as their purpose is achieved, but these are by their nature temporary.   Most organizations are ongoing concerns that serve ongoing needs.


The most familiar kind of organization is a business, which has the following critical characteristics
  • The benefit is enjoyed by someone other than those who contribute to its creation
  • Those who wish to enjoy the benefit are willing to compensate those whose contributions are required to furnish it
  • Those who furnish the benefit wish to be compensated for their contributions


A social organization forms when people seek to organize for their own benefit. 
  • The benefit is enjoyed by some or all members of the group
  • Those who furnish the benefit are compensated by their enjoyment of the benefit


Charities (nonprofit organizations) have the following characteristics:
  • The benefit is enjoyed by someone other than those who contribute to its creation
  • Those who wish to enjoy the benefit are unwilling or unable to pay the cost of furnishing it
  • Someone else is willing to pay for the beneficiaries to receive the benefit 


Government programs are created when there is demand for a benefit but no-one is willing to pay for it voluntarily.  That is:
  • The benefit is enjoyed by someone other than those who contribute to its creation
  • Those who wish to enjoy the benefit are unwilling or unable to pay the cost of furnishing it
  • No-one else is willing to pay for the beneficiaries to receive the benefit 


And as I was reviewing and whittling down the criteria for the four main kinds, it occurred to me that there do exist dysfunctional organizations
  • The benefit is not enjoyed by anyone
  • Those who receive secondary benefits (employment) seek to perpetuate the organization in spite of its lack of a primary benefit

What’s the Point?

This meditation is admittedly outside my usual milieu, but I find the topic comes up fairly often in discussions of new products and programs.  So the value in this consideration is winnowing down a large number of ideas to a smaller number that are worth pursuing: if people could benefit from something but aren’t willing to pay for it, then it’s not a fruitful pursuit for a commercial organization (but might be a good idea for a nonprofit if you can find donors, or a government program if you cannot, or a social organization of the people are able and willing to organize and provide for their own needs).