The Concept of Value in services – 4

B2B, services, Value

Have you noticed that a can of Coke/Pepsi or any similar drink, costs different in a store like Costco , different in a vending machine and different when you are watching a movie in a theatre (it could be the fountain version instead of the can). For all practical purposes its the absolute same thing, except that in case of the fountain drink, its freshly made. But the price difference that you pay could be more than 10 times for the same volume of drink.

How’s that possible. Its because of the value in the eyes of the customer. If you are at a subway / metro platform and you suddenly feel very thirsty, you can’t wait to take a trip to the Costco/Walmart store and pick a pack of 6 cans. You know, that for the cost of the can from the vending machine, you can buy 6 cans, but you still buy it. The key is convenience. You are getting a chilled can , where you are, when you are thirsty, so you can quench your thirst right there.

Now lets look at the cost of the drink when you buy it at the multiplex, whether its a can or from the fountain. Its even more expensive than the vending machine. How come?

Its because of two factors – first, you are in a closed environment where there’s no other vendor selling the drink – so there’s no competition, its a monopolistic situation for that location. You cannot come out of the multiplex to find a vending machine near the multiplex, take a can and go back in. Most movie theatres don’t allow outside food and drinks inside their premises.

Now the second point – when you go to the multiplex, you are with your family or with your boy/girl friend on a date. You don’t want to be seen as stingy. You want to enjoy your time, you want to also want to show-off. So you buy the popcorn and you take the large drink because the popcorn will make you thirsty, even though you know its way expensive.

Now there are all kinds of customers you will face for your services as well. One customer may prefer to carry a can, in her bag, so in case she feels thirsty, she can take it out of the bag and drink it. It may not be chilled, but she is saving money. These kind of customers will always want you, to give them the lowest price of the services and say they will take care of the rest.

Then there’s another set who is okay with paying for the convenience if there’s a definite benefit. This kind of customer will expect you to do the “whole” thing for her on a turnkey basis even if it costs more on the components but she does not take a chance of something failing. A lot of B2B customers fall in this category because they don’t want to have situation where something doesn’t work because one of the separate components doesn’t work. You can charge a substantial amount of money because the customer values the fact that you will ensure that things will work. This is the concept of System Integrator in B2B companies or a media house.

The highest value is being in a kind of a monopolistic situation – but it can cut both ways. So, as an example, if you are the only company which can provide services on a specific kind of a product, then you get to charge a price which is much higher than the market. So if you are in a niche which is large for you to make money but small or fragmented for your competitors, then you can make a lot of money.

On the other hand, and this is the downside, if that product on which you are selling services, stops selling, then your business comes to an end. A lot of movie theatres had to close shop because of the Covid restrictions as an example while the Costco/Walmart or vending machines continued working.

If you are making enough profit then you can survive and have the marketing stamina to get into other markets if one market starts collapsing. So as a practice try to create your services such they are more convenient for the buyer or where you can be in a monopolistic situation.

Till next time then.

Carpe Diem!!!

The concept of Value – in Services – 2

B2B, Product Management, services, Value, value proposition

In the post yesterday we had seen how services can have different values for different people and its our responsibility as sellers and product managers to create the value differentiation. 

If we look at the B2B segment, there’s a very clear difference between how the value is seen if it is helpful in getting revenue or is it about cost.

Anything which can help increase revenue is always more valuable, versus anything that is about cost is always going to be seen as less valuable.

Therefore any proposal on the cost side will take longer to close, until and unless there’s an emergency of some kind, versus a proposal which talks about increasing revenue.

Even when you’re going from the “gate” which brings in the revenue, you have to be able to showcase how your service forms a solution to their overall problem of increasing revenue. As an example,you can’t go in saying I am a content writer and therefore I can increase revenue….you won’t be able to move ahead.

On the other hand if you understand the problem that they have and how content writing can be the solution to their problems then you have a bright road ahead.

Its happened with me many times, where , we created an amazing offering for the cost side and were not able to get it to move with customers because they were already solving the problem in a different way. But we started getting traction the moment we moved towards re-orienting the solution from the revenue side.

This is a key thing to learn for all of us who are in the services business of any kind.

Till next time then.

Carpe Diem!!!

Amazing lesson in marketing – Part 2

expectations, service quality

This is a continuation of the post I wrote yesterday.

This is special service related businesses. Since I mostly work with service related businesses this is a critical aspect which I want to highlight.

If you read yesterday’s post, I had written about how this hotel’s hostess and the F&B manager served us so well or rather delighted us,and then nudged us onto sharing our experiences on TripAdvisor.

In any service business, the front end staff are your brand ambassadors. You may stay in the best brand of a hotel, but if your experience with the staff is not good, you don’t go back to that brand. I have personally had this experience with one of the largest hotel brands. It was an aspirational brand for me and my family at one point because it was an American brand.

Indian hospitality is well known, so when I entered this hotel in one of their hotels in India and I was asked to wait in line by an uninterested person, I chose to no longer stay in that brand in the future. Now even when I travel to the US and Canada, I don’t stay with them

In the service business there’s one equation which has got imprinted in my mind. I don’t remember where I read this equation but its a good way to depict what happens in a customer scenario. The equation is

S (Satisfaction) = P (performance)- E (expectations)

In a service business its always critical that you manage the expectations of the customers rather than the performance. The higher the expectations, like I had with the US hotel brand in India, the bigger is the challenge for the personnel to satisfy me.

If you’re in the services business, its important that you remember this equation to ensure that you are clearly managing expectations, otherwise you will have disgruntled customers like I had become.

Till next time then.

Carpe Diem!!!