Free service? Don’t set your customer on the wrong track!
Do you also provide a free service in addition to your product? Is the fee included in the price of the product? Are you, as an entrepreneur, constantly busy in keeping your customers satisfied? You are fooling yourself and your customer! Offering a free service as part of your product will set your customer on the wrong track. Services have an added value, which is why you should require a fee for them. Why? I will explain it below through an example.
Advice included in the price
An entrepreneur who supplies vegetable seeds worldwide thinks that his customers are entitled to support and advice. After all, he produces those seeds, so he knows like no other how they must be grown to achieve the best possible yield. This is why a crop consultant visits his customers at least twice a year to advise on cultivation. The costs for this are included in the seed price.
The knowledge gap
Meanwhile, his customers grow in size and become far more internationally oriented. They are taken over by large investors without any specialist knowledge. Furthermore, it becomes increasingly more difficult to find qualified personnel. In this respect, their need for knowledge and advice increases. And the advice of the supplier is included in the product price.
At the same time the growers are aging without their children taking over their businesses. Consultants age as well, and it becomes increasingly more difficult to recruit people with this particular knowledge. In other words, the need of your customers for knowledge and service is growing by leaps and bounds.
Meanwhile, technology continues to develop which increases the expectations of the customers; they know that everything can be measured for the purpose of optimisation as is the case with their smart thermostat at home. They know that you don’t have to own the product to be able to use it, as is the case with Swapfiets or Spotify. Technology also causes products to become more complex and the same applies to the corresponding service. The growing difference between knowledge at the customer and at the supplier is what is referred to as the knowledge gap.
Additional advice, still included in the price
The entrepreneur is still selling the seeds for a fixed price including the twice-yearly visits of a crop consultant. It is the opinion of his customers, however, that they are entitled to more support than before because of their scale size. Customers are asking more questions and the crop consultants can no longer handle the work.
The entrepreneur is aware of the fact that the satisfaction of his customers will decrease if he doesn’t deploy more crop consultants. They may even cross over to the competition. This results in increasing costs through having to hire more consultants. The customers, however, consider the free service the most natural thing in the world as it is included in the seed price. After all, that is what the seed supplier said, right?
Untenable business case
This is an untenable business case because the continued and strong developments in the market only increase the knowledge gap. Due to the increasing costs, the margin of the seed producer further erodes under the pressure of increasingly bigger customers and it becomes more and more difficult to say no. What should he do?
Stop providing the service? Increase the seed price? Or hope that this will all go away by itself?
What is the problem?
The real problem is that the entrepreneur bases his reasoning on costs and that he has unwittingly educated the customer in the same way. Because the true value of the crop consultant service is immense!
Although the entrepreneur mainly considers it an expense.
Profitable Services is about added value, which is a different story altogether, a story we are able to explain quite well.
Do you opt for costs or for the added value of your service?
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