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Inefficient after sale service performance at samsung system air conditioner dvepartment

UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business

Trƣơng Hồng Chuyên

INEFFICIENT AFTER-SALE SERVICE
PERFORMANCE AT SAMSUNG
SYSTEM AIR CONDITIONER
DEPARTMENT

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City – Year 2018


UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business

Trƣơng Hồng Chuyên

INEFFICIENT AFTER-SALE SERVICE

PERFORMANCE AT SAMSUNG
SYSTEM AIR CONDITIONER
DEPARTMENT
MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: DR. TRẦN PHƢƠNG THẢO

Ho Chi Minh City – Year 2018


Inefficient after-sale service performance at Samsung system air conditioner department

1

Table of Contents
Executive summary ............................................................................................................ 3
CHAPTER 1: PROBLEM IDENTIFICATION .............................................................. 4
1.1.

Company overview .................................................................................................. 4

1.2.

Problem mess .......................................................................................................... 6

1.2.1.

Symptom.................................................................................................................. 6

1.2.2.

Situation analysis ..................................................................................................... 8

1.2.3.

Initial cause-effect map ......................................................................................... 10

1.2.4.

Updated cause-effect map ..................................................................................... 11



1.3.

Problem identification ........................................................................................... 14

1.3.1.

Possible problems .................................................................................................. 14

1.3.2.

Main problem validation ....................................................................................... 15

1.3.3.

Main problem definitions and measurements ....................................................... 16

1.3.4.

Consequences of the problem................................................................................ 18

CHAPTER 2: ALTERNATIVE SOLUTION ................................................................ 21
2.1.

Cause validation .................................................................................................... 21

2.1.1.

Lack of service and product training ..................................................................... 21

2.1.2.

Lack of human resource number ........................................................................... 22

2.1.3.

Shortage of technical capability of the service team ............................................. 23

2.2.

Final cause-effect map........................................................................................... 27

2.3.

Alternative solutions.............................................................................................. 28

2.3.1.

Internalizing........................................................................................................... 28

2.3.2.

Outsourcing ........................................................................................................... 30


Inefficient after-sale service performance at Samsung system air conditioner department

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2.3.3.

Partnering .............................................................................................................. 31

2.4.

Solution selection .................................................................................................. 32

2.5.

Action plan in the organization ............................................................................. 34

2.5.1.

Recruit technical engineers ................................................................................... 34

2.5.2.

Select and sign contract with dealer service centers ............................................. 36

2.6.

Action plan ............................................................................................................ 37

CHAPTER 3: SUPPORTING INFORMATION .......................................................... 40
3.1.

Interview guide ...................................................................................................... 40

3.2.

Transcript ............................................................................................................... 46

3.3.

Data for the existence of inefficient after-sale service performance ..................... 64

References.......................................................................................................................... 67
Appendix............................................................................................................................ 73


Inefficient after-sale service performance at Samsung system air conditioner department

Executive summary
The intensely competing market called for the shift from primary product offer
to more customized solution package.5,6 After-sale service played an equally important
role in the value chain of the company45 to enhance customer value,46 which
eventually benefited the organization in higher competitive advantage,14 long-term
customer relationships, and sales effectiveness.6 The objective of the research was to
identify the central problem happening at the Samsung system air conditioner
department, to explore the causes and effects of the issue on the performance of the
company, and to provide the direction for a solution.
In this study, the research method comprised of literature review and interviews
with different informants (the head of the department, the manager and the technical
engineer in the service team, and two customers). The findings from the interviews
suggested that the company encountered inefficient after-sale service performance,
which affected the competitiveness of the end-to-end service solution to attract a
higher number of large projects, and eventually on the sales effectiveness of the
department.
Based on the main cause, the alternatives for the shortage of human resource
number included internalizing, outsourcing, and partnering options. An action plan for
the 14-month project of improving the efficiency of after-sale performance of all three
regions was developed, which would cost about 71,000 USD. By doubling the number
of internal engineers and dealer service centers, the expected result of the project was
to reduce the average time responding to service requests by 50%. From financial
perspective, the outcome of the project would expect to increase sales and profit for
end-to-end service solution by 390,000 USD and 319,000 USD respectively.

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Inefficient after-sale service performance at Samsung system air conditioner department

CHAPTER 1: PROBLEM IDENTIFICATION
1.1.

Company overview
Headquartered in Seoul, Korea, Samsung was one of the largest conglomerates

in Korea. Since its establishment in 1938, Samsung expanded its business from a small
trading company into numerous fields including food processing, insurance, securities,
retail, electronics, construction, and shipping. After the founder passed away, Samsung
was divided into four business groups: Samsung, Shinsegae, CJ, and Hansol. Since the
1990s, Samsung Group focused its activities in electronics, mobile phones, and
semiconductors on a global scale. Among many subsidiaries of Samsung, Samsung
Electronics was the largest electronics company based on revenue and the fourth
largest brand in the world in 2012.
Since its arrival in Vietnam in 1996, Samsung contributed significantly to the
Vietnamese economy regarding job creation, GDP growth, and export volume. By
2018, Samsung invested total 17 billion USD in Vietnam, contributed 25% to
Vietnam’s total exports and created 110,000 jobs. Samsung had four factories, namely
Samsung Electronics Vietnam (SEV), Samsung Display Vietnam (SDV) in Bac Ninh
province, Samsung Electronics Vietnam Thai Nguyen (SEVT) in Thai Nguyen
province, and Samsung Electronics HCMC CE Complex (SEHC) in Ho Chi Minh
City. These factories were responsible for manufacturing electronic devices,
communication equipment, and display panels. These products were exported to 52
countries, which generated 61 billion USD in revenue and 6 billion USD in profit
equivalent to 30% of the global revenue and 16% of the global net profit of Samsung.
In addition to major factories, located in Ho Chi Minh City, Vietnam, Samsung
Vina Electronics (SAVINA) was one of the most critical business entities of Samsung,
which was responsible for all sales and marketing activities of Samsung’s products and
services in Vietnam. The company followed the business structure of the headquarter
and included two major business divisions: consumer electronics (CE) and information
technology and mobile communications (IM). CE division included audio and visual,
digital appliances, system air conditioner, remote and microphone, and display units
while IM division consisted of mobile and network units (Chart 1 – Appendix).

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Inefficient after-sale service performance at Samsung system air conditioner department

Besides, in order to support the operation of the company, there were customer
service, marketing, management support, product inventory, human resources, general
administration, and strategic sourcing teams (Chart 1 – Appendix).
System air conditioner (SAC) department belonged to the consumer electronics
division. Hence, the head of SAC department reported to the director of the CE
division and managed five business functions including sales, product management,
business development, customer service, and admin. Product management was
responsible for inventory management, pricing, ordering, and marketing activities.
Business development was responsible for system design drawing, design software
training provided to partners and university students as well as relationship
establishment with technical departments of partners. Customer service was
responsible for system installation, training, repair, and maintenance. Admin was
responsible for administrative tasks. There were total four managers and 22 employees
(Chart 2 – Appendix). Except for project sales, business development and admin teams
having only staffs, other teams had a manager and at least one staff. All teams in the
SAC department were expected to cooperate well with each other and commit towards
the goal of growing SAC revenue and profit.
The product portfolio of air conditioners consisted of room air conditioners
(RAC) and system air conditioners (SAC). Based on the product type, RAC was
usually seen hanging on the wall with one indoor unit and one outdoor unit, so it was
best suitable for a room. On the other hand, SAC was a system that connected multiple
indoor and outdoor units. It included technical solutions such as commercial air
conditioners (CAC), free joint multi-air conditioners (FJM), digital variable multi-air
conditioners (DVM), heating, ventilation and air conditioning (HVAC), which was
suitable for residential houses with multiple rooms, small to medium-sized commercial
buildings, or high-rise buildings. Between the two product types, SAC contributed the
higher share of 95% to the total sales compared to 5% of RAC (Table 7 – Appendix).
Based on the customer type, the company utilized a distribution network to sell to
retailers and business customers such as contractors, installers and investors of
construction projects including but not limited to residential houses, luxury
apartments, hotels, office buildings, shopping malls, retail stores, restaurants, galleries.

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Inefficient after-sale service performance at Samsung system air conditioner department

To reach its customers, SAC department utilized a sales force comprising of
two sales managers (the head of SAC department and channel sales manager) and 12
sales reps. Within 12 sales reps, two-thirds of them work in the project team and the
rest worked in the channel team. The significant difference between two groups was
that channel sales reps had to move customers to buy through distribution with a fixed
price scheme, while project sales reps sold directly to customers with more flexible
price scheme depending on the project value. Project team sold to projects worth
50,000 USD and above while the channel team sold to project worth less than 50,000
USD. However, sometimes the divider to distinguish the project value between two
units could be unclear, so both teams worked closely with each other to ensure that
there were no overlapping accounts.
1.2.

Problem mess

1.2.1. Symptom
Firstly, Samsung SAC faced small market share compared to its competitors.
Market share of Samsung AC (5%) was lower than key competitors including Daikin
(25%), Panasonic (25%) and LG (7%). Daikin was the market leader because of its
specialization in one business of air conditioner. In Vietnam, Japanese brands such as
Daikin and Panasonic gained popularity not only because of product efficiency but
also attentive after-sale service network.41 For example, Daikin had a plan to invest
nearly 90 million USD on building the training center and showroom in Ho Chi Minh
City in order to seek about 10,000 technicians from universities, colleges and retailers
for their installation, maintenance and repair service by 2020.41 It was in accordance
with their expansion plan to increase the number of store to 2,000 and repair center to
25 by 2020 while meeting 900 million USD by 2022 which doubled from 2017.41
Table 1: Vietnam AC market share (2017)
Samsung

5%

LG

7%

Panasonic

25%

Daikin

25%

Other brands

38%

41

Source: Nikkei Asian Review , internal information

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Inefficient after-sale service performance at Samsung system air conditioner department

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Secondly, Samsung SAC experienced low sales. From 2015 to 2017, Samsung
SAC sales experienced a slower growth rate than that the whole company, its largest
competitor – Daikin as well as the global, Asia, Vietnam AC markets.
Table 2: CAGR of Samsung SAC, Samsung Vina Electronics, Daikin, global, Asia and Vietnam
AC markets (2015 – 2017)
Samsung SAC

13%

Samsung Vina Electronics

25%

Daikin

30%

Global AC market

2.5%

Asia AC market

34.3%

Vietnam AC market

14.64%

Source: Nikkei Asian Review, TechSci research, Samsung business report41-44

The forecast of 2018 revealed that total sales would be lower than 2017 result.
The target was set at the beginning of the fiscal year based on history sales. Based on
the target, each sales person was assigned with sales quota. Sales forecast was
conducted and reviewed quarterly based on sales opportunities in the pipelines of the
sales team. The management compared sales forecast with the target to evaluate sales
performance and develop sales plan. Based on the sales forecast, there would be a gap
of 13% in the total sales. Specifically, captive sales would be 19% higher than the
target, but local and channel sales would be 11% and 42% lower than the target
respectively.
Table 3: Sales forecast vs. target (2018)
Unit: million USD
2018 Forecast

2018 Target

Gap

Captive

5.7

4.8

19%

Local

10.8

12.2

-11%

Channel

3.5

6

-42%

Total

20

23

-13%

Source: internal sales report

Samsung SAC experienced low sales in channel and local project. From 2015
to 2017, the average captive sales had the highest contribution of 50% to the total


Inefficient after-sale service performance at Samsung system air conditioner department

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sales, while local and channel sales had smaller contribution of one third and one sixth
to the total sales respectively.
Table 4: Sales by destination to total sales (2015 – 2017)
Unit: million USD
2015

2016

2017

Average

% Average

Captive

11.1

11.2

10.2

10.8

51%

Local

5.2

7

8.9

7

33%

Channel

2.4

2.7

4.6

3.2

15%

Total

18.7

20.9

23.7

21.1

100%

Source: internal sales report

Thirdly, Samsung SAC experienced an increased number of after-sale service
complaints. In the last nine months of 2018, 63% of 19,000 customer calls to the call
center of the company was after-sale service requests. Among 12,000 requests, about
13% of them were after-sale service requests for SAC, which doubled that of 2017.
Besides, the recorded customer complaints revealed that the highest number of
complaints about after-sale service came from the largest captive projects (300 cases)
and the largest local projects (180 cases).
Table 5: Number of after-sale service requests and after-sale service complaints (01/2018 –
09/2018)

Number of after-sale
service requests
Number of after-sale
service request (SAC)

2017

01/2018 – 09/2018

% Change

10,600

12,000

13.2%

750

1,500

100%

175

300

71.4%

100

180

80%

Number of after-sale
service complaints (captive
projects)
Number of after-sale
service complaints (local
projects)
Source: internal meeting

1.2.2. Situation analysis


Inefficient after-sale service performance at Samsung system air conditioner department

From the symptoms, Samsung SAC potentially faced low sales, especially in
channel and local project sales, and the increased number of after-sale service
complaints. According to the interview with the head of the department, Samsung
SAC had small market share due to low sales volume. Sales volume depended on
project customers, so lack of large projects led to low sales volume. The ability to win
the large projects depended on the competitive capacity of the brand in contracting
bidding. However, that the head admitted that the team faced difficulty to attract large
projects and attract large distributors to produce high sales volume due to less
competitive price, undifferentiated product, and inefficient after-sale service
performance.
Firstly, the head shared that Samsung SAC was unable to compete on price with
strong competitors who could do anything to offer the lowest price as possible. The
price of SAC was usually not publicly seen due to the dependence on various
requirements of technical aspects related to the construction project such as the length
of the pipelines needed, the height, and the design of the construction... The pricing
proposal was carefully prepared and submitted to the contractors for participating in
the formal contract bidding. However, the head admitted that price of Samsung SAC
was among the highest in the market. From an informal conversation with a sales rep,
taking a 5-HP air conditioner, for example, the price of Samsung product was
equivalent to Daikin, which followed by Mitsubishi, Toshiba, Sharp, Panasonic, and
LG. The sales rep explained that Panasonic was still a weak brand in larger SAC, so
the price was somewhat higher than LG who started to become a stronger player in the
SAC market.
Secondly, the head shared that other competitors caught up with the latest
technology available in the market for designing and developing their products.
Although the headquarter invested a lot in R&D to build differentiated products mostly
based on the design and energy efficiency, the head with his experience dealing with
contractors revealed that contractors usually did not think about the final electricity bill
of the investors (energy efficiency), so the sales team often found it difficult to
emphasize the product benefit based on the energy efficiency. From an informal
conversation with a sales rep, he shared that unlike competitors, Samsung did not carry

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Inefficient after-sale service performance at Samsung system air conditioner department

non-inverter line anymore, but price-sensitive customers still had high demand. The
inverter technology was the latest development in the AC industry where the
temperature could be continuously regulated. As a result, the product operation had
less noise, lower operating cost, and fewer breakdowns at the exchange of higher
price. Hence, the differentiation initiative based on the energy efficiency of Samsung
encountered reluctance from customers whose focus was on price.
Finally, the head had high concern for inefficient after-sale service
performance, which caused higher chances of product defects and led to increased
customer complaints. The head with his long-time experience in the equipment supply
industry revealed that it was difficult for Samsung SAC to compete with other
competitors on just price and product. Since the beginning of 2018, Samsung started to
offer end-to-end service solution separately from product price, which took care from
installation to warranty of products. While many contractors mostly concerned about
the cost in the first place, investors were more interested in product efficiency, which
assured their high investment. Large sales volume depended on a few key customer
accounts, but there was increased number of customer complaints about the
dissatisfaction with frequent product breakdowns. Hence, the situation of inefficient
after-sale service performance, especially slow repair and low involvement in
installation and maintenance, did not only affect current customers but also contributed
to uncompetitive capacity of Samsung SAC in bidding for large project contracts.
1.2.3. Initial cause-effect map

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Inefficient after-sale service performance at Samsung system air conditioner department

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Potential problems
Symptoms
Less competitive
price

Lack of large
projects
Low sales

Small
market
share

Difficult to
attract new
distributors

Undifferentiated
product

Slow repair
Inefficient
after-sale service
performance

Low
involvement in
installation and
maintenance

Frequent
product
breakdowns

Increased
customer
complaints

1.2.4. Updated cause-effect map
In the industrial context, solution included the integration of product, service
and knowledge that not only solve the strategic customer problem but also added value
for the customer in use.1-5 The role of manufacturers used to be inactive when sales
ended, but rationale needs for economic value, customer requirements and competition
called for the integration of services into the core product.6 There was a rising trend for
manufacturers to adopt “servitization” practices to bundle service and product and sold
with the value-based price (premium charge), which provided higher value for
customers and increased firm performance such as sales growth.7-11 Proactive solutions
could be offered through the identification and diagnose of problems that customers
might not fully aware, hence provided higher competitive advantage and business
opportunity for the firm.6,7,12 Hence, the integration of product and service as a


Inefficient after-sale service performance at Samsung system air conditioner department

solution which aimed to solve customer problem and sold at premium price affected
the competitive advantage and sales performance of the firm.
After-sale service was part of solution selling,13 which had positive
relationships with competitive advantage, sales growth of the company, and customer
purchase decision.14 Economic quality, technical quality and functional quality related
to customer trust in service supplier.15 Economic quality regarded to the customer
perception of the value of service attributes, service performance and the outcome of
using the service with regards to goal and purpose of customer usage.16 The perceived
value could go further than past customer experience to how supplier would fulfill
customer service expectations in the future.17,18 Overall service quality included
technical quality and functional quality. Technical quality referred to the actual service
performance that met and even exceeded customer expectation.15 Functional quality
referred to the responsiveness in the execution of service delivery including efficient
handling of repair requests, customer respectfulness, and quick refurbishment.15
Besides, customer satisfaction was the emotional feeling of customers about the
service provider,19 which affected repeat purchase as well as sales and profit associated
with the acquisition of new customer.20 Hence, increased complaints about products
defects reflected customer dissatisfaction with actual service performance provided by
the firm. The inefficient after-sale service performance was reflected through slow
service response including slow repair and low involvement in the installation and
maintenance.

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Inefficient after-sale service performance at Samsung system air conditioner department

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Potential problems
Symptoms
Lack of large
projects

Less competitive
price
Less
competitive
capacity
Undifferentiated
product

Low sales
Difficult to
attract new
distributors

Slow repair
Inefficient
after-sale service
performance

Slow service
response
Low
involvement in
installation and
maintenance

Frequent
product
breakdowns

Increased
customer
complaints

Small
market share


Inefficient after-sale service performance at Samsung system air conditioner department

1.3.

14

Problem identification

1.3.1. Possible problems
 Unable to differentiate products from competitors
Other competitors followed similar available technology in the industry. The R&D
in the headquarter invested in differentiating products with energy efficiency and design.
However, there was reluctance from customers whose focus was on price, especially
contractors. Moreover, the head revealed normal technicians were more familiar with
Daikin technical design, so unfamiliarity with technical design of Samsung SAC led to
improper installation and repair. Consequently, higher chance of product breakdowns
happened. The manager revealed that 80% of products defects caused by improper
installation. The manager believed that costs associated with diagnosing and repair for the
product breakdown could be extremely costly for both customers and the company.
Hence, without technical support after the sale, even with the differentiation efforts of
Samsung through good design and energy efficiency, medium to large and complex
projects could still be exposed to the risk of frequent product breakdowns caused by
improper installation and repair.
 Less competitive price
Price of Samsung SAC was among the highest in the market. The head shared that
Samsung targeted at premium and high customer segments. Besides, the head revealed
causes to high price including high import price (60%), high tax including import, special
consumption and value-added taxes (40%), overhead cost (14-23%), and discount for
distributors (25-50%). The head shared that overhead cost included all salary, travel, and
related expenses, which was in an acceptable range compared to other departments in the
company. Besides, the head believed that the discount rate for distributors was
competitive compared to other competitors, but the distributors always used their discount
to lower the listing price to match with the market price. Less competitive price was
mostly concerned with high import price and tax for imported SAC from Korea, which


Inefficient after-sale service performance at Samsung system air conditioner department

15

was determined by the headquarter and the current commercial policy in Vietnam. Hence,
it would be difficult for Samsung to compete on price with competitors who targeted at
low customer segments, imported SAC from ASEAN countries, or produced SAC in
Vietnam, benefiting from low or no import price and tax.
 Inefficient after-sales service performance
The head shared that Samsung SAC was one of the pioneers in Vietnam market,
but he admitted that the after-sale service did not receive enough attention as the service
team was small compared to other departments and the competitors. The head shared that
before 2018, after-sale service was mainly done by outsourced partners. The manager
revealed that improper installation and repair provided by outsourced partners caused not
only difficulty but also high cost in the diagnosis and resolve of the issues. The manager
believed that Samsung used to be in a passive position to help reinforce the customer
confidence in the brand when the product breakdown happened. With the introduction of
end-to-end service solution, the manager expected to increase involvement from Samsung
in providing efficient after-sale service for customers. However, the existing situation of
improper installation and repair caused the frustration in the management, employees and
customers to retain current customers and expand selling end-to-end service solution to
new customers.
1.3.2. Main problem validation
It became increasingly and equally challenging for manufacturers to differentiate
from rivals based on low price and to maintain superior position based on technology, so
the development of service strategy acquired attention as it provided the manufacturer
with competitive advantage and differentiation opportunities.21 In the context of the
company, due to less competitive price and undifferentiated product compared to other
competitors, it would be wiser to focus on after-sale service as a game changer in the
competitive market. Firstly, it was uneasy to lower the price due to high price and tax
associated with imported SAC from Korea. Secondly, the company was unable to


Inefficient after-sale service performance at Samsung system air conditioner department

16

differentiate the product due to the latest available technology in the industry in addition
to unfamiliar product design with normal technicians. Thirdly, inefficient after-sale
service performance increased cost of repair. Unlike other consumer products such as TV
or cellphones, cost to repair a system was much higher than cost to repair a unit of
consumer product.
The trade-offs to make an impact on price or changing the product design would be
out of the control of the department. On the other hand, improving after-sale service
performance would add valuable benefits for the company and customers towards
achieving strategic sales growth. After-sale service which aimed at increase product
efficiency helped reinforce customer trust and enhance customer retention, which
increased new sales opportunities with both current and new customer.26 Moreover, the
development of efficient after-sale service performance followed the strategic plan of
service expansion where the head and the manager had specific controls over it.
Therefore, it would be meaningful to focus on the inefficient after-sale service
performance as a central problem of the research.
1.3.3. Main problem definitions and measurements
After-sale service could be defined as various activities taking place after product
purchase and provided customers with continuous support during their product usage. The
value of after-sale service was to prevent and reduce potential problems happening with
the product, which enhanced satisfying customer experience. After-sale service included
the set of activities which occurred after the product purchase and devoted to supporting
customers in their product usage and disposal.6,22 After-sale service were activities that
firms engaged after the product purchase to minimize possible product problems and
maximize the value for the customer in their consumption.23 Delivery, installation, and
warranty were part of after-sale service.24
It was possible to evaluate the efficiency of after-sale service performance based
on the activity level with a focus on drivers of performance such as responsiveness and


Inefficient after-sale service performance at Samsung system air conditioner department

17

quality. Besides, it was useful to compare between the goal and actual performance with
regards to financial outcomes and customer-related outcomes to evaluate the effectiveness
of after-sale service activities. After-sale service associated with five peculiar
characteristics.25,26 Firstly, as a business, the development of after-sale service considered
the balance between profit and customer satisfaction, customer loyalty as well as both
short-term and long-term investment.25 Secondly, as a nature of service, after-sale service
generated profit and customer retention through the contribution of both front and backoffice activities in addition to human resources, proximity to customers, indirect cost, and
service level such as quality and timeliness.25 Thirdly, as a process, after-sale service
consisted of different activities to maintain product quality and reliability in order to
enhance customer satisfaction.25 Hence, the efficiency of after-sale services depended on
activity level where each activity consumed resource and delivered functionality to
customers.25 Fourthly, as an organizational unit, after-sale service performance needed to
be monitored by the manager through key performance indicators in order to understand
the gap between goal and actual outcome.25 The key performance indicator for after-sale
service needed to consider financial results such as cost, revenue and profit as well as
driver of performance such as responsiveness and quality.25 Finally, from a network
perspective, after-sale service was characterized by other participants in the value chain
such as dealers, suppliers, service centers, and customers.25
The service manager measured and controlled the after-sale service performance
through the KPI with the focus on the speed (how fast) and quality (frequency of product
breakdown) of service. The manager utilized the number of service turnaround day for
after-sale service to evaluate the after-sale service level of Samsung SAC department.
From the internal meeting presented by the service manager (Section 3.3 – Supporting
information), most of the after-sale service complaints revealed customer dissatisfaction
with frequent product breakdowns and long time of service completion. About 8% of
1,500 after-sale service jobs had the service turnaround day exceeding 20 days, which
was about three times the average number of service turnaround day for SAC and about


Inefficient after-sale service performance at Samsung system air conditioner department

18

seven times the average number of service turnaround day for RAC. These cases
belonged to medium and large projects with the contract value from 50,000 USD and
above. The service turnaround day indicated how long it took the service team to get back
to the customer after the first checkup and how long it took the service team to complete
the service job. Hence, the existence of long service completion indicated slow service
response, which led to an increasing number of after-sale service complaints.
1.3.4. Consequences of the problem
In the situation of global competition and reduced profit for original products,
after-sale service for durable products provided source of profit and competitive
advantage.6,27 In the manufacturing industry of machine and equipment, product margin
could drop to about 2%, while sales of after-sale service and spare parts could be three
times the initial purchase and its margin could be more than 10%.28 The head shared that
inefficient after-sale service performance did not only affect the source of SAC revenue
but also source of after-sale service revenue. An informal interview with the technical
engineer revealed that cost of all spare parts to build an SAC could be two to three times
higher than the price of an original product. Depending on project size, sales of end-toend service solution could be 10% to 20% SAC sales. Normal warranty period was two
years, spare part and service was offered at no extra cost for customers. After warranty
period, price of addition warranty coverage could be up to 65% of product price.
Service performance played a vital role in determining customer trust, which
influenced customer retention.15 Customer retention was essential to facilitate the
effectiveness of solution selling.13 Maintaining close relationships with customers
enhanced customer knowledge which led to increased customer loyalty, so customers
voluntarily seek suppliers instead of suppliers chasing after them.13 In the case of the
continuous purchase, customer satisfaction influenced customer’s trust, loyalty, retention,
and word-of-mouth.19 Customer satisfaction affected repeat purchase as well as sales and
profit associated with the acquisition of new customer.19 It was better to provide


Inefficient after-sale service performance at Samsung system air conditioner department

19

customers with no service failure than successful service recovery29 because customers
could be satisfied with the recovery but might not forget the bad experience with service
failure.30 The manager believed that the purpose of the service team was to assure
customer with their purchase decision. For the old and current customers, after-sale
service performance played an important role in retaining customers and winning back
their trust in service, which affected repeat purchase. The manager believed that what
mattered most to customers was prompt service could be performed when product
breakdown happened, in the shortest amount of time as possible and no failures would
occur in the future. For new customers, it was expected that an excellent after-sale service
would attract more project customers. Besides, brand image influenced and was
influenced by after-sale service.31 The head thought that dissatisfied customers spread the
rumors about lousy service experience with others, which affected negatively to the brand
image.
In B2B context, customer trust was stronger predictor of customer retention than
customer satisfaction, so firms needed to go beyond satisfaction (emotional feeling of
customers about service provider) and build trust (customer confidence in the reliability
and integrity of service provider).15,32,33 After-sale service did not only maximize
customer value over the whole product life cycle,34 but also enhanced customer
confidence and supplier creditability.35 Both of the partner and the customer agreed that
their confidence to sell or to buy was influenced by the company’s after-sale service
performance. The distributor believed that the after-sale support such as training and
response to service requests both in and out of warranty played an important role in
determining the consulting information that distributors gave to customers when selling
Samsung SAC. Hence, customers could make easier buying decision based on the selling
consultancy of the distributor. Similarly, the customer shared that his past experience with
the company’s after-sale service affected their confidence in choosing the brand for their
future projects. The customer revealed that for contract bidding, the committee depended
on three criteria including price, product quality, and after-sale service in order to give


Inefficient after-sale service performance at Samsung system air conditioner department

20

score to a brand. As there was a clear difference in price, but it was harder to tell the
difference in the product quality and after-sale service, the customer depended on external
information from the group of engineers from other factories. Therefore, the inefficient
after-sale service performance affected sales effectiveness of the department including
both tangible values (sales, profit, repeat purchase) and intangible values (brand image,
competitive advantage, customer satisfaction, customer trust, customer loyalty, customer
retention).


Inefficient after-sale service performance at Samsung system air conditioner department

21

CHAPTER 2: ALTERNATIVE SOLUTION
2.1.

Cause validation

2.1.1. Lack of service and product training
To identify the cause, the head and the manager identified the most crucial aftersale service items within the company context in accordance with the SAC industry. The
firm could strategize its after-sale service as the provider of predefined and standardized
services (inspection, repair, spare part, helpline, training), the provider of customer
support (extensive maintenance to improve the product efficiency and effectiveness) or
become a development partner (co-created solution with customers regarding design and
construction service).36 After that, five-item measurement scale from “poor” to
“excellent”26 was adapted for the head’s subjective evaluation of the after-sale service
performance of the SAC department compared to the key competitor.
In the context of the company, training, delivery, installation, and warranty were
identified as critical after-sale service items with regards to the SAC industry. Both of the
head and the manager generally evaluated that the current after-sale service performance
of the SAC department was less competitive than competitors and needed improvement.
The head shared that training on product setup and usage for customers was proper. The
manager shared that the number of training per person exceeded the expectation, but only
met half of the goal of training for installation and repair service. The head shared that the
delivery process included product ordering and shipping. The order took about one and a
half months and products could be shipped in two weeks. The head shared that there were
no issue with the delivery, but he thought that the standard shipping package was less
competitive than competitors. For example, the competitor could offer the shipping truck
and crane for orders with high sales volume.
Both of the head and the manager had strong concern for slow repair and low
support for installation and maintenance. There was an increased number of customer
complains for warranty service from medium and large projects, especially key account


Inefficient after-sale service performance at Samsung system air conditioner department

22

customers. Besides, the company did not involve in the installation of all projects, while
maintenance was only given to some specific large projects. Therefore, the head and the
manager evaluated that repair and maintenance service had the worst performance
followed by installation, training and delivery respectively.
Table 6: Critical after-sale service activities and importance (within the industry), and
management’s self-evaluation on after-sale service performance (compared with key competitor) of
Samsung SAC
Activities

Importance

Evaluation

Training

Extremely important

Fair

Delivery

Extremely important

Good

Installation

Extremely important

Fair

Maintenance

Extremely important

Poor

Repair

Extremely important

Poor

Source: interview with the head and the manager

2.1.2. Lack of human resource number
The performance of after-sale service was determined by human resource fit,
which referred to the extent to which trained and skilled employees were used for the
production and delivery of service. 36 The head, the manager, and the engineer agreed that
the number of technical engineer was not enough for the expansion plan (Table 8 –
Appendix). There was lack of engineer in the Central. Besides, current two engineers
located in the North and the South could not cover increased after-sale service demand in
the regions. The technical engineer clarified that the service team were overloaded with
an increased number of service requests. There were an average of 300 medium to large
projects per year, 150 projects in the South, 120 projects in the North, and 30 projects in
the Central (Table 10 – Appendix). The engineer revealed that he had on average five to
seven projects to take care of every week and the systems needed repair after about one to
two months. However, the typical duration of a service job took at least three to five days
for small projects and at least one month for large projects. Hence, the engineer admitted


Inefficient after-sale service performance at Samsung system air conditioner department

23

that with the current number of personnel, it was impossible to respond to increased
number of repair requests for larger number and bigger size of projects, not even
mentioned the responsibility to be involved more in installation phase for every project to
ensure proper installation and providing training to all outsourced service partners.
Due to the geographical distance, the firm had contract with both dependent
(authorized service center) and independent (dealer service centers) service providers who
were knowledgeable about customer’s culture and values, as extended arms.37 The head,
the manager and the engineer agreed that agreed that the number of dealer service center
was not enough to cover the market (Table 9 – Appendix). The engineer shared that 50
authorized service centers across the country capable of repairing SAC, but they were also
responsible for servicing all product lines of Samsung and not directly contracted by the
SAC department, so there was less priority on the support for SAC. Besides, there was
lack of dealer service centers directly contracted by the SAC department in many areas of
three regions such as Southeast, Thai Nguyen, Da Nang and Nha Trang... The current
dealer service centers were unable to cover increased service demand in the regions. The
manager explained that distributor’s branches could possibly be assigned in performing
installation service. However, the profit of repairing service was so small that branches
could not be assigned. Hence, the manager believed that there was lack of dealer service
center in unoccupied locations with large demand for repair service.
2.1.3. Shortage of technical capability of the service team
The head, the manager, and the engineer agreed that there was lack of sufficient
level of technical capability of outsourced service partners. The head shared that normal
technicians were not familiar with technical design of Samsung SAC. As a result,
improper installation and repair provided by independent installers or contractors
happened due to lack of experience with and technical knowledge of the system design,
which caused higher possibility of the product breakdown. The manager revealed that
improper installation and repair caused not only difficulty but also high cost in the


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