Published: June 08, 2020 | Comments
Earlier this year, ICMI published an article entitled How Service Became a Product and Why That’s Bad. I believe differentiated service offers are great for customers and I will explain the keys for developing a successful premium service offer.
Yes, more companies are moving to premium service and support offers, but the companies doing this well are certainly not turning their backs on customers who remain with basic service. These companies understand their duty to meet their customers’ needs through a basic service package, but also realize the value that carefully designed premium service packages deliver for customers who want it. Will the customers who pay more receive more service amenities? Yes - as they should. Will the customers on basic service receive poor service? Heck no! All customers, even those on a basic service package should be treated with a similar respect and courtesy. Basic service does not mean bad service.
Southwest Airlines is consistently recognized for their top-notch customer service. Like many airlines, they know their passengers have vastly different needs and wants, and have created different offers targeting these different customer segments. The budget-constrained college student who just wants a flight home at the lowest price certainly does not expect priority boarding and a complimentary in-flight cocktail like a business traveler might. A cocktail and priority boarding for every passenger would require the airline to raise their prices for everyone, leaving some out of the market entirely. Offering only a budget option with no cocktail or priority boarding would likewise leave an important, higher-revenue customer out of the market.
Like Southwest, many companies understand that one size does not fit all when it comes to serving customers. While it is an example of a B2C success in offering different tiers of service options, let’s explore why many B2B companies differentiate service offers to best meet their customers’ needs and contribute to revenue growth.
What is Premium Service?
Basic support is typically designed to keep the product or service functional for the customer. Often, basic service includes standard service level agreements (SLAs), self-service, access to support agents through standard channels, standard product updates, and normal product issue resolution. Customers deserve resolution to their issues in a reasonable timeframe so they can continue to utilize the company’s product or service. Companies must assist customers with these issues quickly and easily. Delivering basic support well creates trust with customers and establishes a strong foundation for premium service offers.
Premium service is a level of customer service that extends beyond basic service activities described above. These are value-added services and are fair game for monetization. While the exact premium service offers may vary based on each company’s unique needs, premium offers often include adoption services that help accelerate return on investment (ROI) for customers, services to help reduce complexity and costs associated with use of the product, dedicated resources such as a Technical Account Manager, enhanced Service Level Agreements (SLAs), and possibly additional channels.
No matter the offer, one thing is for sure: a premium offer must deliver a tangible value to the customer.
Why Does Premium Service Make Sense?
Having various levels of support is beneficial for customers because they can choose the options that best meet their needs. Customers on premium service packages tend to have a higher level of customer satisfaction - this is likely because you are meeting their needs, helping them achieve business outcomes, and delivering value.
By bundling too many services with a basic offer, companies might miss a segment of the market because they are priced too high for customers wanting the product at the lowest cost possible. Conversely, companies stand to lose deals without a premium offer. Some customers need a higher level of service – and are willing to pay for it.
Perhaps a premium offer is a more cost-effective option than a customer hiring additional employees to complete the work. For example, at a previous company, we sold an education technology product that many customers used very successfully on their own. The technology-only offer was attractive to many prospects because the price was right, but some wanted us to provide an instructor to deliver the course. These customers were paying for the outcome – a trained and certified employee. This is true across the board. Customers on premium service packages are not just paying for “better” service – they are paying for valuable outcomes. By offering a basic, technology-only offer and a premium, technology-plus service offer, we expanded our market and closed more business than we would have with only a basic offer.
So Why Do Some Object?
The objections to a premium service are often internal, where colleagues do not believe customers should pay for a premium service. After all, it’s hard to draw a line between free and fee when “good service” and “going above and beyond” are interchangeable and mean many different things to different people.
Somehow, we’ve gotten to this place where everyone believes we should do what’s right for the customer, no matter the cost. While a noble aspiration, and sometimes appropriate, this is often time consuming and expensive to do at scale. Launching a successful premium service will likely require a comprehensive change management strategy. Sales teams must become comfortable articulating the combined value of the product and the service. Additionally, companies must determine positioning, who sells it, the commission plan, revenue recognition, margin, and price. All these things are doable, and none should be an excuse not to pursue premium services. A key to success, however, is to change the discussion from price to value.
Keys to a Successful Premium Offer
Deliver well on the basics.
Turn-around time, communication, and quality are what I consider support fundamentals. These are the price of admission and every company should strive to deliver these fundamentals well as part of a basic service package. Doing so establishes a confidence and trust that creates a firm foundation for building a portfolio of premium services. Can you imagine asking a customer to pay more for premium service when you are not doing the basics well? Delivering on the support fundamentals is imperative.
Articulate the value.
When setting up your premium offers, your marketing and sales teams will be key allies. Start by helping them understand the value of the services and the promised outcomes. If your colleagues do not understand the value of premium service, there is no chance that customers will. Ensure colleagues are comfortable switching the discussion with customers from price to value. As soon as it becomes about price, you will surely lose. Services always take a hit when a customer is price conscious, but when the customer understands the incremental value they can expect from the premium service, they are more inclined to pay for it.
Segment the market.
As businesses grow and mature, it is difficult and expensive to be all things to all customers. Premium service, while beneficial for many, is not for all customers. Before you launch a premium service offer, put in the work to understand which customers would be a good fit and which would not. Consider segmenting customers by vertical, size, revenue, or lifetime value and then develop service offers best for each segment. Be sure your sales and marketing teams understand the profiles for the offer so they can focus on the segments where they are most likely to be successful.
The last thing you want is for a customer to call support and be told they can’t have a certain service because they didn’t purchase it. There are, of course, better ways of delivering this news, but my point is customers do not like surprises. Set expectations in the sales process about what is included with each level of support.
Customers buy premium service because they are buying an outcome. Do not lose sight of this as agents deliver the service. The formula is simple: provide extraordinary value, deliver it incredibly well, and create positive financial impact for the customer. Delivering on this will ensure the customer achieves their desired outcome, recognizes the service value, and will continue to renew the premium service.
Companies will continue to develop compelling premium service offers, but this does not mean basic service customers should be left behind. Customers’ needs are ever changing and growing. Remember the college kid on the Southwest flight? In a few years, she may be a frequently flying executive who values the business class ticket. This is exactly why executing on the basic service well and in a way that meets customer needs will create a solid foundation from which to build value-add premium services.
Photo courtesy of wocintechchat.com.