You wouldn’t launch a product without knowing how you are going to pay for it. However all too often companies start to offer services without giving a lot of thought to the funding mechanism.
Here are 5 ways to fund the services that you offer:
1. Bundle the cost of the service in with the product. This is one of the most common methods for product manufacturers and is essentially the warranty that you offer. However you need to know what the warranty is going to cost you so that you can ensure the product price covers this additional cost. If you don’t have a product sale to fund the service then you need to consider one of the following:
2. Charge customers for the service. This is the direct revenue model, you provide the service and the customer pays for it. Sounds easy, however it can be difficult to determine the right price for the service. To remain in business for the long term you need to sell your services for a price that is fair and palatable for your customers. You can rip them off once but they won’t give you a second chance. Benchmark yourself against what is a reasonable price for the market you are in and what your competitors charge. You don’t have to charge the same, it can be more or less, but you do need to be able to tell people why it is different.
3. Service delivery is a two way street and relies on interaction and effort from both the service provider and the customer. Since the effort required from each side will influence the cost why not see if the customer can take over more of the work from you. It will allow you to reduce the cost of providing the service, which is one way to fund it! If you are really good, you can charge the customer for training them on how to serve themselves…:)
4. Review your process for service delivery to determine where you can remove steps from it. This can have two big benefits. Every step you can remove from the service delivery process will reduce your operating costs and get the service to the customer quicker…a winner for both sides.
5. Look at the long term. Are there investments (hardware, software, staff training, etc.) that you can make now that will reduce your costs in delivering the service in the long term. Spend now to save later
These tips give you some ideas to look at when you are designing your service offerings, and that is the time when you should be examining how to fund your service. Service excellence is not cheap and someone has to pay for it.
There is of course a 6th tip, but that’s called Charity…