How to add services to your product offering:
Transforming your business from being solely a products maker and provider into offering services has been carried out by some of the biggest companies in the world.
Take computer giant IBM as an example. It had been a hugely successful company sailing into the 1990s but then in 1993 posted at the time the biggest loss in corporate American history of $8bn.
Businesses and consumers were buying more ‘nimble’ machines declaring IBM’s products were stuck in the past.
IBM deducted that the IT industry was becoming more commoditised and needed to develop more high-value service offerings to stand out, differentiate and add revenues.
It therefore developed services such as maintenance, application management services and management consulting.
Rolls-Royce is another good example. It moved from simply selling jet engines to adding maintenance packages. Power service company Hilti added a fleet management policy to its core activity of selling power tools.
They look after all the tools on a building site, charge a monthly fee for services and repairs and lend tools in case of a breakdown.
By adding value services you can deepen your customer relationships and create more revenues. It is a more complex operation than producing and then selling but it means more consistent revenues which every bank manager or lender likes to see.
So how do you add a services offering?
1-Take a look at your whole organisation from top to bottom. What business model or product enhancement will differentiate you from your competition? Try and stick with what you know – don’t try and offer a service which is not linked to your product. You don’t want to be a cutlery manufacturer adding on services such as in-store dog walking training! Try and wrap a service around an existing product. How can you innovate and add value to the current offering you give your customer? Look around at what your competition is doing – don’t be afraid to replicate their model – just do it better!
2-Don’t just do the research internally. You have to talk to your customers. Discuss where you are thinking of going as a business and the new services you are contemplating. Do they agree, are they the kind of services they would buy? Do they want different services? There is no point investing in new services such as maintenance packages if the customer is not interested. They have to be on board.
3-Thoroughly account for all investment costs. Changing your business model will be expensive with upfront spending necessary. How will you finance the changes?
4-Your employees – you will be asking more of them with the changes. Ask yourself what skills do we need, what skills do we currently have, what can we develop and what do we need to acquire. Look at whether training is needed and where you can access that training. Look at whether you might need to bring in new talent – perhaps people with more customer facing skills? Take into account that both training and recruitment can be costly, time-consuming and potentially disruptive to the business. Be agile in your thinking – perhaps you need to switch roles in your organisation? Evaluate all your employees talents – are they better at dealing with customers, selling new packages etc? You can really tap into new skills and build employee engagement and motivation.
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