The difference between an operational approach and a sales approach to transactions has much to do with the difference between Transaction costing and strategic costing.
Transaction costing is the costing associated with carrying out an economic exchange. Look at it this way. A company wants to buy a computer from a computer vendor. The buyer has a direct cost in the purchase, along with creation of a bay to house the computer. These are direct costs for it along with an indirect cost associated from its purchase department. The sum of the first and second form the transaction cost.
On the computer vendor’s side, there is a cost of product, delivery and service. These are direct costs. However there is another aspect related to the acquisition of the customer and its retention which probably may not be in the purview of the operations team.
This is where strategic costing comes in. Strategic costing looks at an incremental performance improvement including the customer dimension. Every transaction which is carried out with a customer has in it the root for another transaction. When a customer perceives a product or a service, his perception is based not only on its utility and cost but the overall experience including the acquisition of the product or service.
So second, third and other consecutive sales are a product of the overall experience of the first sale. This is where incremental performance comes in. In the case of the computer vendor and the buyer the operational approach would be to look at the cost of carrying out the transaction only on the basis of the present balance sheet approach. The approach of the sales would be to view each sale as a precursor to another sale. The advantage in such a sale is that it would come at a much lower acquisition cost and impact future balance sheets also.
Of course there are risks associated with transaction costs running out of control for an indeterminate future and this lies at the root of the eternal conflict between operations and sales. At what point do you cease to incur costs in carrying out transactions? How do you reconcile between the two approaches?
Do you look at transferring some notional costs towards marketing costs, to maintain a balance in transactions? Whatever needs to be done, a balance is needed between toady’s balance sheet and tomorrow’s. You cannot have cost effective operations coming at the cost of customer satisfaction which will effect your future.
At the end what needs to be remembered is that we should not just visualize a future but enable it.
2 comments:
good one....the same approach can be applied to multiple aspects of our lives really - at home at work in life!
Ideally both sales and operations should work closely with parity and should have equal stake and transparency in over all delivery. From customer point of view its overall experience that matters and after the sales if operational support is missing then it will impact future business with the customer.
In short sales works towards getting the new customer and Operations should works in retaining the existing customers. And for reconciliation on differences both should focus on business dynamics to constantly upgrade their business model.
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