Establish premium pricing
As technology continues to develop, product features, speeds and quality have become so similar that it is a real challenge for manufactures to create significant differentiation from their competition. Internet resellers have exasperated the situation by building their businesses on razor thin margins with little overhead. As such, the end user customers are able to shop around quickly and buy on price if they see no real value in paying a premium price for nearly identical equipment. In some marketplaces, products have become commodities or parity products where the market forces prices down to the point where margins are so thin that many manufacturers and resellers can’t compete.

At the same time, adding real value to your products can allow you to differentiate them from the competition. Effectively marketing your products based on the true value that they bring to the customer can have a much greater impact on their buying decision than price. When it comes down to it, the customer reverted to buying based on price because they didn’t see any other compelling difference to make their decision other than price.

For many manufacturers and resellers, adding quality services to the sale can be the key that allows premium pricing for their products. Customers, especially in commercial markets are not looking for a piece of equipment and software, they are really looking for a solution to a business need. The new equipment or software will allow them to do something easier, faster or better that will result in making more money for their business. It all comes down to reliability and utilization that determines the real value they receive not the initial price they paid.

Adding quality repair and professional services allows manufactures and resellers to offer a solution to their customer’s business problems. In today’s commodity environment where hardware is often sold near cost, services are most often sold at list price. The real value that the customer places on services allow significant margins to be realized from the sale of hardware and software when service is included in the sale.

The potential for premium pricing for products is created when customers perceive that they truly get greater value by paying more. In a well-balanced environment, premium-pricing opportunities include a combination of brand value, superior products and quality services. However, many companies have not yet established adequate brand equity or technology limits significant product differentiation. At that point, quality services become the differentiation that sets them apart from their competition. By effectively marketing your services value to the marketplace, it allows you to create high margin service sales that increases initial revenue and creates long-term annuity. At the same time, it can also allow you to break out of the commodity environment and create premium pricing of your hardware and software products based on the real value that you bring to your customers.

Don’t compete on price, but instead build true value and effectively market it to create premium pricing potential for your products.

Increase revenue
If your business is based primarily on hardware and software product revenue, consider the potential of adding or expanding services offerings to increase revenue and profits. By adding extended warranties, maintenance agreements, enhancement or professional services to each sale, the initial sale revenue potential can increase from 10 to 60%. In subsequent years the annuity stream created over the life of the product increases your ongoing potential and creates long-term revenue stability. In addition, the service relationship that you establish with your customers allows you to sell additional enhancement and professional services and have a reason to maintain ongoing touch points with your customers.

Over and above the obvious service revenue potential, customer satisfaction gained through the experiences of quality services can create long-term up-sell potential for your products. Satisfied customers are far more likely to prefer your products when they need to expand, upgrade or update.

It’s a win-win-win for you with increased initial revenue, long term annuity and customer dedication.

Stabilize business
Unfortunately, all businesses are impacted by economic conditions that can include the stock market, interest rates, political conditions and regional economies. In addition, the impact of competition, technology and product life cycles can create cyclic revenue that may jeopardize a company’s existence.

For many companies, well-managed and marketed services can be the key to creating a stable business model. With conscience efforts to include services with each sale, the impact of external factors can be greatly diminished. Over time, the percentage of company revenue based on services will continue to increase allowing your reliance on hardware and software product to become less significant.

By expanding the types of services you offer, you can continue to increase the potential for a stable business model based on services. On-going sales of non-repair services like training, site services and system optimization can create additional revenue opportunity and increase the customer’s reliance on your services. Expanding into multi-vendor services can allow an even broader base of service potential.

Attract and retain customers
Customers, especially in the commercial sector are looking for solutions to their business needs and problems. If they see a compelling difference between their buying options, they will key on those that create the most value potential and lowest risk for their business. By developing a strong brand value and effectively building marketplace equity you can attract more customers who need and want real value. Integrating value branding, customer benefits and unmatched features creates an unbeatable combination when communicated to the marketplace.

Once captured, customers who are happy or even delighted with the experience of doing business with you will now rely on you for their future success of their business. Customers who buy a piece of equipment based on price alone are much more likely to shop around for their next purchase. On the other hand, customers who perceive a real value from a vendor have little reason to shop around for their next piece of equipment and are very likely to recommend you to their peers. However, when it comes to actually achieving marketplace value perception many companies have not been effective. Developing value-based marketing that takes advantage of the opportunity to integrate tangible product marketing with invisible services product marketing can be complex. It takes conscience effort, skill and experience to create powerful integrated marketing campaigns. At S-Market Strategies, our experienced team can evaluate your business and create the strategies and tactics to put you on the road to truly leverage the power of your services.

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