Tale as old as time. Leading brands attempting to find pathways to monetize their customer. There is a delicate balance that manufacturers and service providers have found between supply and demand and gouging. According to Harvard Business School Professor, Bharat Anand “Demand curves can move over time because willingness to pay moves over time—even for the same product.”
A shift in mindset to monetize advanced features (or advanced support) is something we continue to advocate…in the right setting. We have seen extremely positive scenarios where this has occurred and where the benefit of the newfound relationship is mutually beneficial. Take for example, the healthcare industry. Leading manufacturers are offering advanced Service Level Agreements (SLAs), some even Outcome-Based in nature, to maintain asset health and proactively monitor asset condition for predictive/proactive support with stiffer SLAs (4 hour window, 99%+ asset uptime, etc.) and with stiffer rewards and penalties. This is a positive scenario given the intensive nature of the asset we are attempting to optimize performance against. I can’t imagine it would be a good thing if a heart monitoring system failed in the middle of a surgery. Other industies, take for example the food service industry, have also witnessed a shift in the relationship where there has been a win/win. Take for example, Coca-Cola (Shameless Plug: Michael Galon, Director of Service North America will be be keynoting at our Smarter Services Executive Symposium this September 9-11 — Join Us). The soda fountains are one of the most profitable aspects of the retail food industry. If this asset isn’t operating, profits significantly suffer. Those damn ice cream machines… LOL
Proactive and predictive support approaches take a very concerted effort to digitize/digitalize/transform, whereby you create a connected customer experience using enabling technologies such as Internet of Things (IoT), Machine Learning, Business Intelligence (BI), Knowledge Management (KM) and advanced Service Lifecycle Management (SLM) platforms to connect people-process-technology-data-parts. We have seen this transformation occur with grace and mutual benefit and have documented many case study examples which can be found in our research library (link).
And then we have witnessed non-successful attempts at monetizing such capabilities. Take for example, BMW when they introduced their heated seats subscription ($18/month). A premier, luxury-brand, vehicle manufacturer attempting to gouge customers and carve out heated seats (a feature built into the car at the point of purchase where this expectation was already set). In the year prevailing this decision, BMW witnessed a -5% drop according to the American Customer Satisfaction Index. Cautionary tale…
Just today, Wendy’s announced they would be introducing “Surge Pricing” where price rates will shift according to peaks in demand. Let me further clarify: when they are busier and your customer experience is diminished, they are going to gouge you as a customer. Good grief! This might be Chapter 1 in the book: “How Not To Increase Customer Loyalty”.
Brands (B2C or B2B) must be careful when attempting to monetize the customer against advanced capabilities. I’m not arguing that it can not be done. I’m just saying that you must start with the Customer and work your way backwards. If we are creating an improved customer experience, then the customer may be willing to pay a premium. If we are not, well the opposite is true. Then ask yourself, are we mature in our delivery capabilities to consistently deliver these proactive and predictive approaches. A shift in approach such as this requires a significant culture shift from a financial and operational perspective. But when done effectively and with the customer in mind it can be magical for both the Customer and the Provider.
