Depending on the relationship between the provider and the consumer, it can be difficult for the provider to fully understand the outcomes that the consumer wants to achieve. In some cases, both parties will work together to define the desired outcomes.
Cost
Costs are the amount of money spent on a specific activity or resource. From the service consumer’s perspective, there are two types of cost involved in service relationships:
- Costs removed from the consumer by the service (a part of the value proposition). For example, for a car sharing service, the customer does not pay for the actual cost of purchasing the car.
- Costs imposed on the consumer by the service (the costs of service consumption). In a car sharing service, the customer pays for cellular or internet services to request the service.
The two types of cost must be fully understood if a service provider is to obtain value for money and ensure the right decisions are made about the service provision. Providers need to ensure that services are delivered within budget constraints and meet the financial expectations of the organization.
Risk
A risk is any event, including possible events, that could cause harm or loss or make it more difficult to achieve objectives. Risk is considered an uncertain outcome, one that that can be positive or negative. Two types of risk are concerning to service consumers:
- Risks removed from a consumer by the
service (part of the value proposition). For example, for an online streaming service, the failure of equipment involved in delivering the service.
- Risks imposed on a consumer by the service (risks of service consumption). For an online streaming service, the threat of lawsuit for copyright infringement.
It is the duty of the provider to manage the detailed level of risk on behalf of the consumer. However, the consumer has a role to play in contributing to risk reduction as a function of value co-creation. The consumer contributes to reducing risk by:
- Actively participating in defining the service requirements and clarifying its required outcomes, often on an ongoing basis.
- Clearly communicating the critical success factors (CSFs) and constraints that apply to the service.
- Ensuring the provider has access to the necessary consumer resources throughout the service relationship.
Utility & Warranty
How do we know that a service is delivering value for the consumer and meeting the service provider’s requirements? By evaluating, in totality, the utility and warranty of the service.
Utility is defined as the functionality offered by a product or service to meet a particular need. Utility perhaps answers ‘what the service does’ or whether a service is ‘fit for purpose’. To have utility, a service must either support the performance of the consumer and/or remove constraints from the consumer.