Selling is about making it easy for your prospect or customer to buy. This transformation takes service contract selling into the 21st century and is powered by new marketing ideas and concepts.
Tiered service contracts
When tiered service contracts were introduced almost 30 years ago, they were usually shown to customers in tabular form. These tables listed the features in the left column and the various service levels across the top. Check marks or something similar were used to indicate the features included in each level. When complete, the table looked like this:
Customers understood that the contract cost increased as the value of the underlying metal increased. When a company decided to add a super contract, it was usually named “platinum” and shown to the left of the gold column.
Since the bronze level was so basic, it was unlikely that the business would introduce a contract with fewer features. If they did, it was usually described as an extended warranty. And we all knew that it was not like an actual service contract.
What Has Changed When Marketing Service Contracts??
A recent blog post titled. It’s All About Outcomes describes how people now buy services (and products) to enjoy the outcomes they get when using their purchases. For example, nobody buys a tablet to learn to type with one or two fingers. They buy the tablet to gain knowledge or enjoyment from reading a book, to keep in contact with friends and family using Facebook, or to find a new job using LinkedIn. They buy for the outcomes, not the features! And when the results make their work better or easier, the product or service creates customer value.
When upgrading features like extra memory, they want to watch streaming videos or create music.
Yet, many companies still position their service contracts based on the features as in the first table.
Outcome-Based Service Contracts
So, how do you change your marketing approach and sell the outcomes? The good news is that it is not as complicated as it sounds. The bad news is that you have to know what outcomes your customers need and what you can realistically promise to deliver. Here is an example:
Let me give an example of why this is so important. You can see that this table uses Class 1…Class 4 instead of Platinum …Bronze and that instead of check marks the table outcomes, specifications, and actual performance for each contract level. Customers know exactly what to expect if and when an issue arises.
An Actual Story About Marketing of Service Contracts
When I first became VP of Global Services for a data communications company, I started traveling to meet with our key customers. My first visit was with the Network Director of one of the New York-based stock exchanges. We had a valuable discussion, and I went home and started acting on his concerns. After a few visits with him, we both felt very comfortable with each other. We went to lunch, and he said he would pay. What a feeling of accomplishment! After some small talk, I asked him the one question I was dying to ask:
Q. “Our product is fault tolerant and redundant and the likelihood of any two of the same redundant parts failing simultaneously is miniscule. Why do you have such a comprehensive and expensive contract including an on-site engineer during the critical hours of operation?”
A. He smiled and said, “If during the trading and settlement hours the network is down for more than a total of 40 minutes for the whole year, I lose my bonus! So, I buy the best products, from the best companies, and then I buy the best service contracts that are available. I am doing what my company wants me to do; spend their money to ensure we meet our uptime requirements. That may cost them some money but one major outage can lose us more in credibility and lost revenue.”
He never mentioned features, benefits, or outcomes. However, he was fixated on two outcomes – network uptime and his bonus!
Key Takeaways
The competition is talking about outcomes (21st century). If you still show your customers the first table, you may be guilty of not selling them what they need and want. And, if your services business is a microcosm of your whole company, then the company may find that it is missing out on new sales because they are talking about features and benefits (20th century).
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of its clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization improve its marketing of service contracts, please get in touch with us or check out some of our free articles and white papers here.