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Would you recommend having different support packages based upon customer's profit levels?
My sales process is very complex and has a long sales cycle. I invest a lot of time and expenses upfront for my customers to manage their projects before I get paid.
I have suggested implementing three different support packages depending upon the amount of profit a project brings in. Example: If a customer brings in a high profit project they will get full access to my tools and services along with follow-up services for free. If a customer is only interested in price, I can accommodate those needs but due to reduced profit levels they will not get full access to my team. Any thoughts?
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4 Answers
Craig, it's an interesting question. I think it's good to differentiate levels of support by customer category. However, I' not sure that I would use the criteria you outline, it might create a shortsightedness about the potential value of a customer.
For example, I would tend to look at the long term potential value of a customer. Would you provide more support to a customer that buys at a higher profit margin, but is likely to never buy again --- or to a customer that was buying at a slightly lower margin but had the potential to buy over and over again for many years.
Also, the logic in the way you pose the scenario confuses me a little. You take a higher margin customer, provide free services---lowering your margin, perhaps narrowing the difference between that customer and the other.
Having said all that, I do agree that you shouldn't provide the same level of support to all customers, but should differentiate based on some criteria meaningful to your business.
Craig - it is the premise of a great idea. Use price discrimination rather than your own judgment - in other words let your customer decide what level of support they are willing to pay for. It is not really anything new to price products, services or support with different levels. What is great about using price is that you can bump a prospective good customer up to premier service to close a deal - That is if you really want that particular customer's business. You can also use this to curb attrition/ churn or win back customers that already left. I don't know what business you are in or if it is B2C or B2B, but everyone loves great service and people are willing to pay, stay or come back to be treated like one of the VIPs.
I like your question, Craig. I employ a similar philosophy myself. In the end, my net margin is similar from all customers. If their project has a higher gross margin, I offer them a more inclusive package. If the gross margin is thinner, they must choose to take on some of the services themselves. The result to me is a consistent return on my time and services.
The approach is sound, Craig, but when setting customer expectations you must be transparent about it. If you have three levels of service, make certain your various customers know what they should expect from you for each (not just the one they are buying), what they will need to give to the process themselves to ensure collaborative success, and what they would need to provide to you to get the next level of service if they desire it. Transparency allows the customer to 'buy up' if they find they need to, and to have very clear expectations of what they are getting compared to the company who referred them to you.
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Belldon Colme
belldoncolme@gmail.com
The short answer: yes, I do.
Great question, and in fact, this was the subject of a detailed study in the outsourced IT services market. (I couldn't find a link to the study when I looked it up just now, but I've included the URL below to a blog that I wrote that summarizes the findings, and links to the professor at the University of Missouri who conducted the study). If you don't have time to read it, the net is: customers who generated on-target profits for their IT vendors were more satisfied overall with the quality of the services and the quality of the relationship. Customers who were below margin were, on average, less satisfied.
No great epiphany there--the adage "you get what you pay for" has been around a long time. For whatever reason, that doesn't stop buyers from attempting to squeeze every last nickel out of a vendor's price, and vendors from accepting business that's not valuable.
"Does This Software Make Me Look Fat?" http://www.customerthink.com/blog/does_this_software_make_me_look_fat
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