Andrew Bass’s Pragmatics Newsletter June 2013
Practical techniques and thought-provoking ideas
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Amplifying Profit in Services
As I discussed in my previous newsletter, the essence of profit amplification is to increase value to the customer more than you increase the cost of providing it. Bundling is a great way to do this. I talked mainly about products last month, and some readers asked me about services. Actually, product-service distinctions start to break down when you take the view that customers don’t really want either. What they really want is a result – that could come from products, services, or very often from creative combinations of the two.
How do you develop such combinations? There are many techniques, but here are a few to play with:
1. ‘Before, during and after’. Theatre directors sometimes get their cast to improvise what happened immediately before and after the scene actually written by the playwright. That way, they create a back-story which makes the scene itself more satisfying. Business can do something similar. For example, Virgin Upper Class does a lot for passengers before and after their flight, and it bumps up the value, and the price, nicely. How can you make the before, during and after better for your clients and customers?
2. Remove the top hassles. What are the hassles of using your core products or services? Often it’s to do with switching provider. Apple have loads of Mac enthusiasts in their stores to help you set up your new laptop, get your email working before you leave the store, learn how to migrate data from a PC, even how to produce your own podcast. What are the major hassles of using your offerings (ask your customers). What can you do to help them?
3. ‘Mise en place’. It’s a French phrase which means “putting in place”. It refers to organizing and arranging the ingredients and utensils that a chef will require for the dishes they are going to prepare. Last month I mentioned Cardinal Health and the surgical kits they tailored to specific operations. By doing the mise en place for the surgeons, they commanded a premium. How can you make it easier for people to set themselves up to make use of your offering? Can you advantageously do the mise en place for them?
4. “While we’re doing that for you…” Among many things, Xerox offer document preparation. They noticed that they were being asked to prepare documents in various languages and realised they could offer to do the translation as an integrated service. They get the economies of scale, so can do it for lower cost than their client, and – more exciting – can combine it with their other capabilities to accelerate the roll-out of their clients’ new offerings across international markets. That’s worth paying for. Can you reduce the number of handoffs or subcontractors for your clients to help them get where they need to be more quickly, at lower cost, or with better quality?
You can use any of these four ideas to rethink what you offer, and combine that with other bundling ideas I’ve mentioned before. It’s best to generate plenty of ideas – that way you are most likely to find opportunities to provide disproportionately more additional value than it costs you to do so.
Some related blog-posts and podcasts you might enjoy
Amplifying Profit through Bundling – people like kits, and arranging your core offering in such a form can create additional value – both tangible and intangible. And the additional value can be disproportional to the cost. That means more profit.
Pricing Quiz – many people are hazy about the relationship between price and profit. As a result they lower prices too quickly, and their profits suffer for it.
What’s a Question Worth? – too many people in sales – especially technical sales or professional services – still lead on features. Clients and customers care about results. In this podcast I recount an example of working with a lawyer on a product recall, and how by asking a few extra questions she was able to command a higher fee that the client was delighted to pay.
© 2013 Andrew Bass. All Rights Reserved.