Implementing a fee-for-service plan can be challenging, especially if you've already been giving away what you now want your customers to pay for, according to Mark Dancer in Free Your Customers. To break free, distributors must recognize that customers are also ensnared in long-ingrained buying practices.
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The only lever distributors have given customers is to demand lower product prices, so they will demand lower prices again and again while expecting the same level of service. But customers will consider buying for-fee services from distributors if the services reliably and measurably reduce costs and drive profits in the customers’ businesses.
Dancer offers five steps for breaking free of this trap.
- Get the facts: Explore how you might drive customer costs down and line up your skills and resources as for-fee services. But don't stop with anecdotal stories. Quantify your costs to deliver the service and measure the gains you can deliver.
- Question your judgment: Too many distributor service strategies start with an 'I can do it, so I can sell it' mentality. Test your ideas with customers. Look to other industries for examples. Remember that you are effectively designing a new product, and by most studies, the vast majority of new products fail.
- Add new competencies: Getting customers to pay for something that has been free is a very difficult, often impossible, challenge. Adding to your list of value-add gives you leverage to make that shift.
- Build on your history with customers: Customers will want a guarantee, but you will still have the greatest success with customers that you have served with creativity over time. Start your investigations and offerings with these customers before taking them to others.
- Don't forget your suppliers: In many cases, it will not be possible to maximize customer value unless distributors and suppliers pool their resources and knowledge. Distributors are closer to the customer's operations, but manufacturers know the true capabilities of their products. Moreover, there are redundancies that can be reduced only if distributors and manufacturers agree to work together in new ways.