Moving from product- to service-centric focus? Go all out.

Service transition strategies may not generate shareholder value if a firm’s push into services is only half-hearted. In this article, Jan-Benedict E.M. Steenkamp shows that service sales need to account for 20-30% of the firm portfolio before they have positive effects.

Service transition strategy

Service transition strategies, i.e., moving from a product-to a service- centric business, add to shareholder value. However, the positive impact of service transition strategies only starts to affect shareholder value when the firm reaches a critical mass of services sales of 20–30%, at which point they have an increasingly positive effect.

Evidence base

477 publicly traded U.S. manufacturing firms from 1990 to 2005

Managerial implications

Service transition strategies may fail to generate shareholder value if the push into services is halfhearted. Companies should recognize that service transition strategies typically require building a critical mass in sales of services- to- products ratio in the product/service portfolio, estimated to be 20–30%, before they can expect positive effects on shareholder value.

Contributor

Jan-Benedict E.M. Steenkamp, University of North Carolina at Chapel Hill

Reference

Fang, Eric, Robert W. Palmatier, and Jan- Benedict E.M. Steenkamp (2008), “Effect of Service Transition Strategies on Firm Value.” Journal of Marketing 72 (5), 1–14

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