Product or Service? Service or Product?

Do you sell the Ser­vice or the Product?

In all the sell cycles I have ever been in there is an argu­ment for lead­ing with either.  I must say that sell­ing the ser­vice and giv­ing the prod­uct away has always seemed the smarter choice but almost no one  does it that way.   A few excep­tions to this are the razor blade peo­ple who will give you the han­dle because you ‘ll need to buy the blades going for­ward and the cell phone folks who give you the phone when you sign up for the service.  

Whether you sell a ‘thing’ or a soft­ware appli­ca­tion, or a ser­vice,  I’m not sure it makes a dif­fer­ence.  There are typ­i­cally 2 pieces to any trans­ac­tion, the prod­uct and the going for­ward  services.

Is this  mind set dri­ven by mar­gins? Typ­i­cally the ‘prod­uct’ has some sort of mar­gin and the going for­ward ser­vice is all profit.  (a car and a war­ranty for exam­ple).   Or is it mar­keted with the hopes you have a solu­tion that fits like a good pair of shoes and the only main­te­nance will be a heal replace­ment or a new sole?  So you should get your money up front.

Not sure.

I recently had an appli­ance crap out on me and it was only 4 years old.  I called the ser­vice depart­ment, described the prob­lem and asked what it would be to have some­one look at it.
 
Well….120 bucks to look at it, they told me it sounded like the trans­mis­sion, the new part is esti­mated at 180 bucks and then another trip to come out and replace it. OR I could buy a 300 dol­lar one year main­te­nance agree­ment and have it fixed for Free! Wow what a deal!

Need­less to say I went out and bought a new one for 350 and installed it myself.  I won­der what a tech­ni­cal buyer or a finan­cial buyer would have done with a enter­prise level prod­uct that did the same thing?

Point being if you have ser­vices that are the bulk of your offer, sell them up front.  Ini­tial and ongo­ing ser­vices, it may make sense to change the game at the start. Know your buyer and what they are accus­tomed to pay­ing for.  At the end of the day it’s it’s all about the total cost of own­er­ship, and in many cases, aver­sion to risk.  Your  cus­tomer maybe less likely to flinch at high ongo­ing ser­vice costs, and ready to balk a cap­i­tal out­lays espe­cially in today’s envi­ron­ment. What if I was offered a clothes washer that cost me $100 per year and I was guar­an­teed a new one, installed  every 5 years?

Remem­ber your cus­tomers are expect­ing to grow, to stand out and per­form. No good C level buyer is going to hang them­selves out there for just a good deal. Sell the solu­tion, the whole solu­tion and don’t for­get that Ser­vices and Sup­port are what will ulti­mately make your sale a suc­cess or failure. 

One Response to “ Product or Service? Service or Product? ”

1. Tuna says:

   August 29, 2009 at 6:22 am

   The point you made about buy­ers hav­ing an ‘aver­sion to risk’ is huge.