How servitization changes global B2B distribution?

by Taru Hakanen (VTT), Nina Helander (TTY/VY) & Katri Valkokari (VTT)

Servitization development increases the scope of intangible assets in the offerings of manufacturers and increases the importance of customer interactions and ‘customer closeness’. At the same time several manufacturers rely on intermediaries such as agents, distributors, dealers and service providers in order to reach their business customers around the world. However, servitization development may influence global business-to-business distribution in several ways.

The way responsibilities are shared has previously been relatively clear in distribution: the manufacturer focuses mainly on R&D and production, and intermediaries take responsibility for local sales and marketing, customer relationship management and service provision (logistics, after sales services etc.). However, servitization may drastically change the way responsibilities are shared between manufacturers and intermediaries. If a manufacturer develops its offering towards a complex service- and knowledge intensive one, not all of the intermediaries are capable of selling those. Then, manufacturers should either provide sufficient training for the intermediaries or consider selling certain parts of the offering by themselves.

Understanding of the local context of customers, creation of a positive customer experience and adjusting interaction and service co-production to different customer needs and characteristics are at the heart of service business. However, when a manufacturer reaches its customers via the intermediaries of marketing and distribution channels they lack direct contact with their customers. Then, a major challenge occurs: how can a manufacturer develop customer-focused offerings and operations when they do not thoroughly know business customers’ perceptions and expectations of value and customer experience? Is operating via intermediaries then the best way to fulfil customer expectations for value and customer experience in global distribution?

In spite of the indirect marketing and distribution channels in use, manufacturers may reach their customers directly for example, via remote services and various digital channels. In an extreme case, intermediaries may end up losing their position in the distribution channel if the manufacturer pursues closer customer relationships for enhanced customer understanding and starts providing an increasing number of its own services. On the other hand, intermediaries may pursue a competitive advantage through servitization, too. Local services and customer closeness are undoubtedly the intermediaries’ central assets and justification for their role in the distribution channel. Therefore, intermediaries can take on an even stronger role as local service providers.

The optimal model for manufacturers may be a combination of different direct and indirect distribution and marketing channels in global business-to-business distribution. Manufacturers may take on greater responsibility for sales and provision of certain services while intermediaries deal with certain services and customer segments. That way manufacturers can tackle the so-called ‘glocal’ distribution i.e., they balance between, for example, global process efficiency and brand coherency and customizing the offering and service co-production to local customers’ preferences.

Although, huge changes have already taken place in global distribution, digitalization will undoubtedly change global B2B distribution even more!

Hakanen Taru, Helander Nina & Valkokari Katri (In Press). Servitization in global business-to-business distribution: The central activities of manufacturers, Industrial Marketing Management, http://dx.doi.org/10.1016/j.indmarman.2016.10.011

Dimecc REBUS program: http://www.fimecc.com/programs/rebus

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