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AFTER-SALES SERVICES AND CUSTOMERRELATIONSHIP MARKETING:- A MULTIPLE CASE STUDY WITHIN THE SWEDISH HEAVYEQUIPMENT MACHINERY INDUSTRYAuthors: Erika EgonssonMarketing ProgramKhulan BayarsaikhanTutor: Mosad ZineldinExaminer: Rana MostaghelSubject: Relationship and service marketingSubject: Relationship and service marketingMarketing ProgramLevel and Semester: Bachelor ThesisTing Ting LyMarketing ProgramSpring 2013

A BSTRACTDue to growing complexities in business-to-business products, the relationship between aseller and a buyer usually never ends after the purchase transaction. Customers buyaugmented products, expecting bundle of values that come with the product which will satisfythe buyer. Thus, integrating services into the core offerings in manufacturing industries hastaken crucial importance. Especially, after-sales service is considered a tool for enhancing avaluable advantage for the customer as well as it is a business opportunity for the company.After-sales services have proven to be of importance, and a strategic after-sales framework isnecessary. Three major activities that play a crucial role within the after-sales services in themanufacturing industry are field technical assistance, spare parts distribution and customercare. However, intensive studies regarding after-sales in a specific industry are lacking. Thisthesis focuses on the Swedish heavy equipment machinery industry organizations of differentsizes and thus, the purpose of this study is to investigate the major activities of after-salesservice focusing on customer relationship among three classified sizes of after-sales serviceproviders.A multiple case study has been carried out in the form of semi-structured interviews withthree organizations; one small, one medium and one large size after-sales service providers.The study reveals that customer care is the most focused activity of after-sales services in theheavy equipment machinery industry in Sweden. Simultaneously, it shows the mostsignificant differences of offers depending on the size of the company, in relation to theremaining activities. Field technical assistance appears to be the part of after-sales thatproduces least profit in the industry. Thus, it might be the reason that small organizationswould rather tend to outsource it, in order to avoid high costs. Spare parts distribution can beconsidered as the most profitable activity of after-sales. The warehouses and repair centers ofcompanies naturally varied according to firm sizes. Although the organizations do not stateformal goals for providing after-sales service to its customers, they are aware of itsimportance and aim for satisfying customer demands. All organizations are convinced that ifafter-sales services are not handled properly, they face the risk of losing the customer. Finally,this research indicates that organizations in the heavy equipment machinery industry have alot of room for improvements to its after-sales activities with respect to their relationship withcustomers, which can be accomplished in strategic and systematic ways.Keywords: After-sales service, Field technical assistance, Spare parts distribution, Customercare, Customer relationship marketing, Firm size

A CKNOWLEDGEMENTThis study was conducted as our bachelor thesis during our last semester at the InternationalMarketing Program in spring 2013. Within our bachelor thesis we have had the chance to,within a time frame, show our independency in applying our knowledge obtained during ouryears in the program to the independent degree project. It has surely been an improving andvaluable experience. Furthermore, a deeper knowledge in after-sales and its area have beenachieved, and the qualitative research approach has given us the opportunity to approach andgain an insight into organizations in real life. This project was manageable due to a number ofpeople that we would like to thank.Firstly, we would like to show our gratitude by specifically thanking our tutor Dr. MosadZineldin and examiner Dr. Rana Mostaghel for surpassing our expectations about the time andqualitative feedback devoted to us. We would also like to thank Dr. Magnus Hultman for hisvaluable feedback and comments. Lastly, we would like to thank the time and support of thethree organizations which participated in this research.Linnaeus UniversityMay 2013Erika Egonsson, Khulan Bayarsaikhan and Ting Ting Ly

T ABLE OF C ONTENTS1. Introduction . 11.1 Background . 11.2 Problem discussion . 21.3 Delimitations . 31.4 Outline of the thesis. 42. Literature review . 52.1 Relationship after the sale . 52.2 Relationship and customer services . 52.3 Relationship strategies. 62.3.1 Good relationship . 72.3.2 Bad relationship. 82.4 After-sales in business-to-business environment . 82.5 Activities in After-sales service . 92.5.1 Customer Care . 92.5.2 Field Technical Assistance . 102.5.3 Spare parts distribution. 112.6 Manufacturing industry and firm size . 122.7 Need for further investigation . 133. Research model and research questions . 163.1 Proposed research model . 163.2 Research questions . 174. Methodology . 184.1 Research approach. 184.1.1 Inductive vs. deductive research . 184.1.2 Qualitative vs. quantitative research . 194.2 Research design . 194.3 Data sources . 204.4 Research strategy. 21

4.5 Data collection method. 234.6 Data collection instrument . 254.6.1 Operationalization and measurement of variables . 254.6.2 Interview guide . 294.6.3 Pretesting . 304.7 Sampling. 304.7.1 Sampling frame . 314.7.2 Sample selection . 324.7.3 The sample . 334.8 Data analysis method . 334.9 Quality criteria. 354.9.1 Content validity . 354.9.2 Construct validity . 354.9.3 External validity . 364.9.4 Reliability . 375. Empirical data . 385.1 Case A – Small size organization . 395.1.1 Customer care . 395.1.2 Field technical assistance . 405.1.3 Spare parts distribution. 415.1.4 Customer relationship marketing . 415.2 Case B – Medium size organization . 425.2.1 Customer care . 425.2.2 Field technical assistance . 435.2.3 Spare parts distribution. 445.2.4 Customer relationship marketing . 455.3 Case C – Large size organization . 455.3.1 Customer care . 465.3.2 Field technical assistance . 475.3.3 Spare parts distribution. 485.3.4 Customer relationship marketing . 496. Data analysis . 51

6.1 Customer care . 516.1.1 Information provision . 516.1.2 Complaint management. 536.1.3 Warranty extension . 546.2 Field technical assistance . 556.2.1 Check-ups . 566.2.2 During and after warranty assistance . 576.2.3 Product disposal . 586.3 Spare parts distribution. 586.3.1 Inventory management . 596.3.2 Delivery of spare parts . 606.4 Customer relationship marketing . 606.4.1 Service quality . 616.4.2 Customer relationship profitability . 627. Conclusions and implications. 667.1 Discussions . 667.1.1 Customer care . 667.1.2 Field technical assistance . 677.1.3 Spare parts distribution. 687.1.4 Customer relationship marketing . 687.2 Theoretical and managerial implications . 697.3 Limitations . 717.4 Suggestions for future research . 72Reference list . 73Appendix A – Interview guide . 85

L IST OF TABLESTable 1: Literature review overview . 15Table 2: Research strategies . 22Table 3: Operationalization of After-sales . 27Table 4: Operationalization of Customer relationship marketing . 28Table 5: Business categorization in Sweden . 32Table 6: Research methodology summary . 37Table 7: General information about the cases . 38Table 8: Information provision . 52Table 9: Complaint management . 54Table 10: Warranty extension . 55Table 11: Check-ups. 56Table 12: During and after warranty assistance . 57Table 13: Product disposal . 58Table 14: Inventory management . 59Table 15: Delivery of spare parts . 60Table 16: Service quality. 62Table 17: Customer relationship profitability . 64L IST OF FIGURESFigure 1: Service revenue in manufacturing companies . 12Figure 2: Proposed research model . 16

1. I NTRODUCTIONThis chapter presents an introductory discussion of relationship marketing, after-salesservices and the Swedish heavy equipment machinery industry, along with identification ofthe research gap which lead to the purpose of this thesis. Finally, delimitations, and overviewof the thesis outline are elaborated.1.1 B ACKGROUNDA relationship between a company and a customer has previously been based on a productcentric view; however, today relationship between the two parties has taken a shift andcustomers are the main focus in maintaining relationships (Gaiardelli et al., 2007). Creating agood relationship is to generate value for both ends: seller and buyer (Cannon & Perreault,1999; Palmatier et al., 2006). A crucial element in differentiating a company’s offer andexcelling in meeting customers’ needs is by providing services (Anderson & Narus, 1995).Services can influence the costs and profits for both buyer and seller, and can positively affecthow customers do business with their suppliers (ibid). Moreover, after-sales service isconsidered as a tool for enhancing a valuable advantage for the customer as well as it is abusiness opportunity for the company (Saccani et al., 2007).After-sales service is commonly acknowledged as a potential source of revenue, profit andcompetitive advantage in most manufacturing industries (Bundschuh & Dezvane, 2003;Gaiardelli et al., 2007). Research has shown that after-sales in automotive industriescontribute to more than three times bigger turnover than the original purchase of a product(Wise & Baumgartner, 1999). Within the automotive industry, there are significant heavyequipment machinery manufacturing companies in Sweden which are considerablecontributors to the Swedish export as well as national sales (Statistics Sweden1, 2013).Three major activities, critical to after-sales’ success in the manufacturing industry, have beenidentified according to Saccani et al. (2007); these are: field technical assistance, spare partsdistribution and customer care. It is necessary to align all three main activities with the aim ofhaving a successful and comprehensive after-sales offer (Saccani et al., 2007).1

1.2 P ROBLEMDISCU SSIONVarious business researches have highlighted the importance of integrating serv

AFTER-SALES SERVICES AND CUSTOMER RELATIONSHIP MARKETING: - A MULTIPLE CASE STUDY WITHIN THE SWEDISH HEAVY EQUIPMENT MACHINERY INDUSTRY Authors: Erika Egonsson Marketing Program Khulan