Organizing Maintenance Service Contracts for Initial Purchases: The Interplay Among Product Type, Service Type, and Service Approach

Abstract

Purpose: This study investigates the trade-off between product types and the choice between standardization and customization in initial purchases. Attribution theory is used to understand how customers attribute characteristics to products/services and how it affects decision-making. Industrial purchases require service contracts, making it challenging for manufacturers to determine the appropriate service type. The study provides insights for designing service contracts that meet customer preferences and aids decision-making by analyzing the interplay of product type, service type, and approach. Practical recommendations are offered for manufacturers integrating services to gain a competitive edge. This research enhances service offerings and customer satisfaction. Methodology: This study included a combination of qualitative in-depth interviews and a quantitative experimental approach. The qualitative phase involved in-depth interviews with 10 managers working for different equipment manufacturers and purchasing products from those companies. The interview protocol was designed in response to the current study’s research topic and literature review. The interviews lasted about 40 minutes and were all recorded after informing the participants. The authors used the open coding approach to code transcribed interviews. The quantitative phase employed a 2 × 2 × 2 experimental design, with manipulations of product type (production versus auxiliary equipment), service type (service supporting product versus service supporting customer action), and service approach (standardized versus customized). Questionnaires were sent to 957 managers working in purchasing, machinery-energy, maintenance, or upper management at top 500 firms, and the final sample included 157 usable responses. Findings: The authors identified three themes through coding: 1) product type: customers consider the type of production when making a service contract and prioritize maintenance if it is crucial to the production system, 2) service type: customers value manufacturers who offer consultation, training and take responsibility for smooth equipment operation, and 3) service approach: customers want flexibility to add or remove components in the equipment and service offer. However, not all customers hold these preferences all the time. The quantitative part of the study aimed to determine customers’ preferred combinations in different scenarios. The main effect results indicated that ATC (attitude toward the company) and WTP (willingness to pay more) were higher for auxiliary products, services supporting customer actions and customized services. Two-way interaction results showed that ATC and WTP increased more from SSP (service supporting product) to SSC (service supporting customers’ action) when the equipment was production equipment. There was no significant difference in ATC and WTP for the interaction between product type and service approach. Nonetheless, it was found that WTP increased more in the case of customized services specifically designed for SSC. Furthermore, when the service was customized for SSC and production equipment, the three-way interaction analysis revealed a significant increase in both ATC and WTP. Research implications: The study adopted a mixed-method approach to examine the optimal structure of service contracts for initial product purchases. The results revealed that customers exhibit a greater attraction toward and willingness to pay a premium for service contracts when manufacturers offer a blend of services that facilitate customer actions and provide customized product offerings. This finding is consistent with previous research, which indicates that consumers place a premium on the smooth operation of critical equipment in their manufacturing processes. The study also revealed the importance of adapting service offerings to support customer actions and respond to particular needs and expectations. Additionally, the study applied attribution theory to industrial purchasing, highlighting the importance of customizing service offerings to support customer actions and address specific attributions. Moreover, the study unveiled that a customized approach to services, which supports customer actions through offerings such as services supporting product (SSP) or services supporting customer actions (SSC), can optimize the value derived from production equipment by enhancing efficiency and profitability, fostering trust, and fortifying the customer-supplier relationship. Practical implications: In designing service contracts to effectively cater to industrial purchases, managers must prioritize reducing uncertainty for customers and cultivating a favorable attitude toward the service offering. Achieving this goal involves orchestrating service contracts to deliver customized solutions, providing consultancy and training when necessary, especially for equipment crucial to the production line. The provision of individualized assistance holds the potential to increase customers’ willingness to pay higher prices, bestowing the company with a competitive advantage in the market. Consequently, customers gain the assurance of seamless production, while manufacturers reap the benefits of price premiums. However, it is essential to recognize that not all customers may desire individualized solutions with consultancy services, particularly when the equipment’s role in the production line is less critical. For some, cost-cutting is a priority, and they may prefer the freedom to find solutions themselves without disrupting the production line. To accommodate such preferences, standardized service contracts can be employed, ensuring the smooth operation of only the equipment sold. By striking a balance between these parameters, manufacturers can maximize their customer base and profit from each customer, fostering strong and sustainable position in the market they operate. Originality/value/contribution: The present study constitutes a significant contribution to the existing body of literature concerning service and servitization within a business-to-business (B2B) environment. Through an investigation into the intricate dynamics involving product type, service type, and service approach, novel insights emerge regarding their influence on purchasing decisions within the realm of industrial purchases. Attribution theory serves as a useful framework employed in this study, allowing for an exploration of how customers attribute specific characteristics or attributes to products and services and how these attributions impact their decision-making process. By encompassing both the objective features of products and services and the subjective attributions formed by customers, this study presents a different perspective on servitization strategies within the B2B context.