What is service level management? Why it’s important for business.

What is service level management? What is a service level agreement?

Business-to-business market: analysis of the industrial market and customer buying behavior in the market b – b. Every day we are market participants, we buy goods or services to live, for helping ourselves to live better, to express ourselves, to realize our dreams, etc. We usually buy in a market defined as a business for the consumer, where companies sell or offer a product or a service directly to the end user.

There is also another market, business-to-business or industrial market, where “relations” are created between companies: one company buys a product or service from another in order to carry out its activities or maintain it. The first market classification can be made based on the nature of the goods or the differences between products and services.

Another criterion is the service life, which is applicable only to goods, and not to services:

  • durable goods, the period of use of which increases over time (several years), such as machines, such as lathes, trucks, etc. for several years they form a certain part of the assets in the balance sheet of companies: the so-called intangible assets;
  • non-durable goods. They also talk about instrumental goods, that is, products for the development of production or business, for example, cars, airplanes, computers, etc.

Services are intangible assets that are sold to companies in addition to acquired tangible products or are services for stand-alone, such as accounting. The difference between the b-c market and the b-b market is that the last company has fewer customers than the first. In this market, the number of customers is limited, as they are also companies: the relationship between the customer and the supplier is very close, so there is a deep mutual knowledge, which often leads to the development of partnership or joint venture policies.

In recent cases, this also includes the very significant weight of an individual client in the company’s business volume and high risk with a low ability to negotiate. The process of purchasing an industrial client is clearly formulated, formalized, complex and includes several subjects of the company. They also talk about a rational purchase, given that before the purchase various offers from different companies are evaluated, they are analyzed together with other entities to find out whether this purchase can satisfy obvious tangible benefits.

Written specifications are often used, often internationally standardized (ISO standards), and written orders and contracts are provided. There is nothing verbal in the buying and selling process: everything must be done in writing so that there are no unpleasant surprises to protect the companies involved. A product in the industrial market is often customized, and a service component is always present, thus becoming a critical factor in market success.

The importance of price is high in all markets, but the competitive management of this lever remains different. In the b-b market, the price component is usually divided into several components, such as: purchase price, installation price, staff training price and, in many areas of negotiation, such as time, forms of payment and financing, which make the variable a difficult price and difficult to manage. In the industrial market, sales and distribution are usually managed directly through a sales and distribution network using a selective strategy for specific markets or specific purposes.

As part of the service design process, Service Level Management is involved in designing and planning processes, defining service requirements (Service Level Requirements, SLR), negotiating and agreeing on various types of contracts, such as Service Level Agreements, Service Level Agreements and Basic Contracts. Instead, as part of a continuous service improvement process, service level management is linked to service research and development to implement improvements that exist in existing services and processes through monitoring, reporting, and evaluation. on them.

It must also ensure that the services provided are in accordance with the needs of the market and customers. The level negotiates, agrees with external customers and suppliers the goals on which the performance measurement should be based, through the collected data that it generates, reports on its capabilities or on the capabilities of the supplier with which the company is associated, to offer the service to its customers in order to deliver it to a previously agreed level.