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Home - News - Rethinking | My opinion on free service, correct understanding of the value of service

Rethinking | My opinion on free service, correct understanding of the value of service

November 10, 2020

For a long time, the tradition of Chinese enterprises is to emphasize products and light services. Service is only an accessory for products. Some bosses even think that if the quality of the product does not go wrong, the company does not even need to hire service personnel, because in their eyes, Service is a loss-making business.

Customers also don’t recognize the value of the service. It’s okay to ask them to pay for the parts, but if they ask them to pay for the service, they will complain: This is your product. If something goes wrong, shouldn’t you help me fix it for free? Didn’t I ask you to claim the loss of lost work! Labor costs in China have risen rapidly over the years, but it is difficult for companies’ service revenues to grow. The proportion of companies’ turnover is pitifully low because people don’t Recognize the value of services.

Customers do not recognize the value of the service, which has a great relationship with the manufacturer. In the past few years, when competition in the construction machinery market in China became fierce, some domestic brands shouted slogans such as "free lifetime service" and "free lifetime warranty", and regarded maintenance services as "gifts" to attract customers to purchase products. Maintenance services don’t receive much money, so it is better to give them to customers, hoping to increase customer loyalty and increase sales. Some celebrities in the industry actually applauded this practice, believing it is an "innovative move" for Chinese companies' marketing.

Free service hurts the interests of agents and customers

First of all, free service hurts the interests of agents. When manufacturers chanted the resounding slogan of "free service for life", they have already sold out the aftermarket of agents. It will be difficult for agents to charge customers for working hours in maintenance services in the future. Has the manufacturer calculated how much the free service will increase in advance? Has the manufacturer communicated with the agent in advance and obtained their approval? Why does the manufacturer send the agent’s service free of charge? How will they compensate the agent for the loss of working hours? This practice violates the nature of business. Powerful manufacturers often directly determine the service policy of agents, but it is the agents that can suffer losses.

Secondly, the interests of maintenance service engineers have also been greatly harmed. The free service policy is to tell customers that service has no value, and service technicians’ years of experience are of no value. The free service also declares that maintenance is a money-losing business. Service technicians are all “supported” by agents with money. Their contribution to the company is negative, and they can only hold a very low salary, and it is difficult to get a raise and promotion. , How can the loss of money make them feel proud? In this case, it will be more and more difficult to recruit skilled maintenance personnel, the timeliness of the service cannot be guaranteed, and the agents are unable to take care of the old people outside the warranty period. Customers, resulting in a continuous increase in customer churn.

Third, customers are also victims of free services. When the equipment fails, what the customer hopes is to quickly eliminate the fault and resume operation. Free maintenance is not the main demand of the customer, because every day of shutdown will bring huge economic losses. Due to low service income, agents will control the number of service personnel. At the same time, many service personnel are diverted to engage in equipment sales or second-hand equipment due to low income. This makes it more difficult to guarantee the timeliness of services, and ultimately leads to customer dissatisfaction and loss .

Obviously, the free service did not increase customer loyalty as the manufacturer expected. On the contrary, free services will lead to more loss of customers, because customers value the investment value of the equipment life cycle, and timely and high-quality services are the guarantee of this value, and free services just undermine the basis of this guarantee. In short, the free service hurts the interests of all parties and caused more losses.

Correctly understand the value of service

The author believes that when you pay for what you pay for, the value of a product is most directly reflected in its price, and service is also a product, and of course it is no exception. "How do free things reflect their value?" I was puzzled by this question.

From a psychological point of view, if a person earns 10,000 yuan through hard work, the value is completely different from the 10,000 yuan cash he received from the rich. He may use the former to invest in himself, but the latter. High probability to be taken to squander. People often don't cherish what they get for free, because they don't think it has much value.

The charity once sent 120 ewes to a poor village for free, and also provided technical services such as breeding management and breeding of ewes, hoping to help them get rid of poverty through breeding. Unexpectedly, less than half of the 120 ewes were eaten by the villagers, which was dumbfounding. Some developed countries aided the seeds of African corn, wheat and other crops to help them develop agriculture, but Africans ate the seeds! Few people would cherish the things that were obtained for free. Especially those lazy people, they only expect to continue to get something for nothing.

What can really help the poor is not charity, but business. It is not free services that can really help users, but high-quality services that help them succeed in their careers and earn more money. This is the value of services.

In the 2020 "Customer Value Advantage Report", Gartner Consulting proposed how to seize untapped opportunities to drive customer loyalty and reduce customer churn. A survey of more than 6,000 service managers found that troubleshooting product failures is only the customer’s demand experience, not enough to increase customer loyalty; better service is to create a convenient experience that makes customers feel labor-saving and convenient everywhere and makes them willing to follow the company Dealing with, can reduce the customer churn rate; the highest level of customer experience is value experience, helping customers make good use of products and services, bringing them value, and making them believe that choosing this brand is correct, which can increase customer loyalty .

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Gartner proposed a Value Enhancement Score (VES) method, which requires that the services of enterprises must enhance the value experience of customers in the following two aspects:

1. Improve customers' ability to use products and services, and bring value to customers;

2. Make customers more convinced that their decision to choose the product is correct.

Gartner's survey results show that only 15% of service activities bring a value experience to customers.

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The main problem that Chinese companies face is that competition among companies always stays at the price level, so it is not surprising that various price wars and "free service for life". Companies lack insights into customer needs to provide customers with a better value experience. The shift from competing product prices to pursuing customer value experience is an important sign that Chinese companies have reached a higher level.

In mature Western markets, the contribution rate of the aftermarket turnover of construction machinery agents is as high as 60%, while the contribution rate of the aftermarket agents in China is less than 10%. The fundamental reason is this damn "free life service"! Not only hurts customers The interests of, agents and service personnel have also destroyed the aftermarket ecosystem. Without the aftermarket, it is impossible to retain old customers, and the development of the enterprise loses its driving force and can only constantly seek new customers; and the aftermarket is a healthy factor for the sustainable development of agents, because the equipment sales market fluctuates greatly. The market absorption rate (that is, the ratio of the aftermarket revenue to the company's operating costs) determines an agent's ability to resist risks.

The value of service is not only reflected in repairing equipment, but also in creating value for customers, thereby creating more loyal customers and increasing the value of the company's most valuable customer assets. Philip Kotler once said: "The essence of sales is value exchange." What did the free service get in the end? The enterprise gave up the value of the service, and ultimately neither traded for the current market, but also lost the future aftermarket.

Free services are bad marketing strategies developed by laymen who don’t understand the value of services. Free services are easy to send out, but it’s even more difficult to get them back because companies have to violate their original promises.

It can be seen from the experience of the automobile industry that due to fierce competition, the profit of vehicle sales will become thinner and thinner, and the aftermarket will be an important guarantee for the survival and development of enterprises and their agents. Obviously, the free service policy has hurt the foundation of enterprise development, and the evil consequences of this stupid strategy will be more obvious in the future, with endless troubles.

The success of a company does not depend on how high its sales are, but how far it can go. The value of service is a guarantee for the company’s high-quality customer resources. It is essential for the company’s long-term and sustainable development and does not respect the value of service Of enterprises are not far away.