It’s hard to believe that just a decade ago, product manufacturers had little direct interaction with the customers who were actually purchasing and using their goods. Manufacturers sat at the top of a supply chain in which products were distributed through retailers (for consumer products) or resellers (for B2B products), who in turn provided the sales and support functions for the buyers. Sure, manufacturers made significant marketing investments to target groups of demographic-defined customers and prospects through advertising and other promotions, but they never really had to deal directly with their end users or get to know them beyond the basics: age, gender, and location.

The internet changed all that. It’s not just that people started buying more products online but they began relying far more heavily on the internet for presale research and post-sale service. The changes have been a major wake-up call to retailers and resellers to improve the quality of their own customer service, both in stores and online.

In today’s business environment,  if you don’t make a conscious effort to design the delivery of your service it will just form itself – for better or worse.

The importance of the service element can’t be understated.  According to Gartner, in the case of a PC the service revenue is five times the cost of the physical machine. Indeed, it costs five times as much to find a new customer than it does to keep an existing one. Understanding what your customers want and delivering it to them effectively is essential.

Tools available to help retain customers include loyalty schemes, customer data capture, sales incentives and seeking feedback from customers – both good and bad. So what about service?

Service Design is not just another trend – the Guardian newspaper in the UK notes, "In the competitive world of business, what separates an industry’s players is often the service that comes with the product offering – the customer experience. Quality of service determines whether a customer will be loyal, or leave.”

So, good service design helps keep customers happy and attracts new customers, and bad service does the opposite. Good service is also harder for competitors to replicate, since it is often more difficult to execute than simply copying a physical product which is there for all to see.

Achieving excellent service is difficult.  How many times have you heard "we’ve always done it this way!” and felt the pressure of vested interests resisting unwanted change?  Even in the smallest organisations there can be a disconnection between those with power, influence and control over the service delivery and the needs of the customers and users.

Often it is thought that technology can take the place of person-to-person interactions, but this can alienate both customers and employees – "the computer says no.”

So how can you design a service that gives you competitive advantage?

Richard Telford of LiveWork describes it as a four-stage process:

1.Insight – inform the Service Design with insights from users/customers

2.Ideas – collaborate to create clear service propositions

3.Prototype – design how the service works and the service touch points i.e. "service usability”

4.Define – define great service experience, and specify how it should be delivered.

For me, the main lesson is to keep very close to the customer experience and don’t let your top people get disconnected.

For example, when we create our solutions, it is the customer insight that drives the service design.

We talk to hundreds of businesses and investigate their current experiences and future needs through in-depth discussions. We discover our customers basically want to get on with running their businesses and don’t aspire to be accountants. They want the service to be smart to save them time, but also simple to use, with support available to suit the hours they work. So we give them 24/7 telephone support and a straightforward service written in their language.

To summarise – providing a great customer experience is challenging, but it is worth it because it does give you a strong competitive advantage.

Understanding what your existing customers want and delivering it to them effectively is the best way to satisfy. You will secure repeat orders, keep and retain your customers, and benefit from positive word of mouth

So, consider how you currently treat your customers, and if you have not spoken to them recently – or to the support staff providing the service – talk to them today, because tomorrow might be too late.

Mike Lorge is managing director for Sage Business Solutions. Go here for more.