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!!!

The concept of Value in services

services, Value, value proposition

When you operate in the stock market, someone buys a stock at a given price and someone sells at the same price. For the seller it seems like a a good value to sell at that price, because she thinks it may not appreciate in value. On the other hand the buyer thinks that the stock is undervalued at the given price and has a possibility for the price to further increase. However both can go wrong in their estimates.

Unlike a product which has well defined boundaries, a service could be more fluid in nature. Which means that the same service can mean different things to different people and as the seller its your responsibility to bring out the value of a service.

The value will only come out if you know how the service will impact the user. If you can help me improve my revenue 10 times because of your service then, I may be willing to pay you a much higher amount, then if I can’t make out the value you can add.

Like in the stock market the value is what the buyer thinks and willing to pay. But unlike the stock market, here the seller has to be able to bring out the value.

You can fly from Toronto to Delhi in about $1000/- in economy, sitting for 15 hours , packed with 200 people and then sleep for the next 24 hours after you land, because you are exhausted.

Or you could spend 5-7 times as much in first class and travel sleeping and rested , to get on with business immediately after you land.

It’s the same aircraft, that is carrying the 200 people also, nothing different. But if by not being able to work in those of 24 hours is going to result in me losing more than $50000/-, then I will travel first class. For me there’s a value of $50000/- which I can generate by spending $7000/-. That’s what airlines sell – Cash at discount and I value it.

But its your responsibility to identify the right audience who will value what you sell. This is critical.

Till next time then.

Carpe Diem!!!

Selling – Products versus Services

B2B, Sales

When I was younger and people would ask me what I did for a living – my typical answer would be – I get out of the house on my rounds and sell whatever I have been asked to sell that day – some times its potato chips, sometimes its computers. That was in a lighter vein but over the years I have been involved in selling so many different products and services that I don’t actually see too many differences.

I fundamentally believe that selling is selling. Irrespective of what you are selling and to whom you are selling. Whether you are selling a product or a service, at the end of the day, the customer is buying a result that the purchase will give her/him. So you need to figure out the result that the customer is looking for and how you can get them the result. However there’s a lot of academic discussions which talk about why they are different.

My two cents on this topic are as follow

  1. Every thing that you sell has a nuance to it. Even within products – different products would have different kind of audiences , different price points, different results, same would be the case with different kinds of services
  2. The orientation of the consumer sale would be different from the business sale, in terms of the complexity involved in the business to business sale (i.e. number of people and steps) and the time involved.
  3. The way you showcase the result could be different – in consumer products you use advertising, while in B2B you might use a direct sales team.
  4. The way you solicit the business may vary – but some consumer products are also sold to businesses and what was once considered a business product (like computers) could soon become a consumer product.

Inspite of all the above points – one distinct difference is that , generally, products have well defined boundaries while it is tougher to put boundaries on what is constituted as a service because humans are involved in the delivery. So standardisation is much tougher.

In most cases today, the product and service get intertwined – do you go to a restaurant because the food is good or because the ambience and service is excellent or all of them.

Till next time then – it doesn’t matter what you are selling as long as you know the result you get for the customer – rest of the things can be managed.

Carpe Diem!!!