by HPA Senior Advisor Phil Arrata
In the ever-changing customer landscape, a pursuit of growth frequently demands more than refining existing products or optimizing marketing efforts. Companies that seek to grow in competitive industries can turn to the strategic addition of new service offerings. This approach not only allows them to diversify revenue streams, but also positions them to meet the changing needs and expectations of their customers. Whether it’s membership programs, repair services, subscription plans, or comprehensive support services, the strategic integration of these new services can redefine market positioning and pave the way for remarkable growth.
Businesses that adeptly introduce new services open doors. Amazon Prime is the poster child, having transformed from an online retailer into a consumer powerhouse by offering added value in the form of music, movies, expedited shipping, and exclusive offers. Well-designed services can enhance customer satisfaction, deepen loyalty, extend customer lifetime value, and even create new revenue streams. However, this expansion must be approached with care, as the integration of new services can potentially disrupt existing business models. Thoughtful preparation and strategic planning are essential before embarking on this journey.
Key considerations on the path to new service offerings
As consumer businesses explore an expansion of their service offerings, here are a few points of consideration that are instrumental to success:
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Understanding customer needs
Mapping how customers interact with your products over time is fundamental. The objective is to identify gaps where customers might turn to external providers for complementary support services. By understanding the consumer’s lifetime journey with your product – from delivery to setup, use, and disposal – you can identify additional opportunities where you can provide value.
Example: Take for instance an appliance retailer. Beyond offering appliances, they can envision providing seamless direct installation, comprehensive parts availability, and expert repair services. And why stop there? Consider offering a subscription-based plan with scheduled filter replacements, annual maintenance cleaning and checkups, and remote diagnostics. The result? An ongoing connection with customers that forges a bond and improves the odds they’ll send referrals the appliance retailer’s way and keep them top-of-mind for future purchases.
Understanding customer patterns and needs will help your business identify a target audience’s behavior and potential opportunities.
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Assessing capabilities
To ensure the success of new service offerings, it’s essential to have the necessary talent and operational capacity. Adequate investments in equipment, technology, training, workflows, and personnel are prerequisites for effectively scaling up these services. Constructing a robust business case that evaluates the financial upside against incremental costs is also imperative.
Example: One example is a major apparel retailer that offers in-house tailoring services at each of its locations. The benefit is “one-stop” shopping for the customer where a new item of clothing can be tailored on the spot. While this is a great value proposition for the customer, costs for the retailer were significant, necessitating the acquisition of specialized equipment and talent at each location. Ultimately, the services generally tended to be used only by that retailer’s consumers, due to limited walk-in traffic (most neighborhoods have a local tailor). As a result, the retailer needed to re-evaluate the business case and ask itself if incremental sales and/or customer retention justified the cost for this service offering.
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Enhancing value proposition
A service offering should amplify your existing value proposition. If you add this service to your current offering, will the customer enjoy their purchase more?
Example: A simple example is a “starter’s guide” for buyers of a new car. Vehicles are now equipped with so much technology and owners only use a fraction of the capabilities. Some auto-dealers and OEMs offer training courses to fully “unlock” a vehicle’s potential. This type of service enhances the value proposition by ensuring buyers benefit from the full value of their purchase.
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Capturing strategic growth
The introduction of new services to your current offerings can create a strategic pivot point, and your organization should challenge itself to see how that service can create new profit pools. Developing a cohesive blend between existing and new offerings can lead to more value, and proactive planning for subsequent growth curves can help your business stay steps ahead of competitors.
Example: An outdoor equipment retailer saw value in offering in-home repairs and tune-ups for bikes and skis. This new service tied into the company’s growth aspiration and mission to capture more of the outdoor sporting goods market. By expanding beyond brick-and-mortar into the customer home, they created a new strategic advantage over its competitors, alongside a new profit pool. Ultimately the company created a value stream that dovetails into its long-term goals of being the “go-to” for outdoor sporting goods.
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Embracing change
While adding new services might initially be disruptive, embracing the concept of “creative destruction” can lead to profound rejuvenation. By continuously iterating and evolving, companies can reinvigorate their culture, redefine their market presence, and bring fresh value to customers. This might entail setting up dedicated innovation teams, allocating dedicated resources, and investing in rigorous testing.
Example: One of the seminal examples of embracing change was Netflix. Everyone remembers the story of how Netflix evolved from a DVD rental service to a streaming business. At the time of this shift, it was a massive risk for the company with the real potential of cannibalizing its existing business, but had they not embraced change and made that pivot, they may have become an afterthought.
The integration of new service offerings is a pivotal avenue for consumer businesses to get closer to their customers; refine their value propositions; and transform for growth. Providing ongoing services allows companies to gain firsthand knowledge of how customer demands are evolving and gives them a unique opportunity to monitor customer trends while iteratively refining the offerings based on feedback.
Is your company embarking on the service innovation journey?
HighPoint Associates can help you map your customer lifecycle – from purchase consideration to product disposal. Then through detailed surveys, focus groups, observation, and record review, help you form a comprehensive view of your customers’ experience and how a service offering could improve it. Contact our team to get the conversation started.
