02 Mar 9 ways to stop losing money from your service business
If you run a real estate office, a medical service, or any kind of consulting or other service business, you have challenges that are simply not the same as product-pushing businesses. Most of the marketing literature focuses on product businesses and volumes of widgets to push, so do small business textbooks. Given that over 70% of Australia’s economy is now in services, this makes no sense.
I’m sure there are more, but here are my 9 ways you can stop losing money and start pulling in more.
The Four Key Service Differences
Service businesses have different characteristics. They are intangible, inseparable from the service provider, perishable, and variable. Each of these aspects means they are loaded with ways of losing revenue.
Intangibility
Problems
- You cannot patent protect a service.
- It’s difficult to communicate or display the features and benefits.
- They are difficult to price.
Solutions
So what can you do?
1. ‘Tangibilise’ the intangible. Provide physical cues. How?
- Your website is a clue to your service and service quality. Make sure it is easy to navigate, clear to understand, fast to load, frequently updated.
- Use video (e.g. if you are a doona cleaning service, show the process).
Use Strong Organisational Imagery
Services brands need strong organisational imagery. Brand is critical.
Your physical office / customer space. This is known as “the servicescape”. Elements that can express trustworthiness and quality include:
- signage
- staff uniforms
- cleanliness
- customer safety
- lighting, fixtures and fittings
- corporate identity / brand consistency.
Inseparability
Services are generally consumed simultaneously while they are being delivered. The customer is almost always involved. For example, I can’t get a haircut without physically showing up.
This poses another set of problems.
Problems
As a customer, I see the poster on the wall of a haircut I like and the model is holding up two fingers. I may like that long and tousled look and say, “I’ll have a Number Two, please.”
Then the hairdresser starts shearing off clumps with an electric razor! My mistake.
If the customer makes an error, misunderstands the process, requests the wrong thing, hits the wrong button, they are going to have a bad experience.
If I am in the salon and I see somebody else make the Number Two mistake, I will be upset and also have a bad experience. Similarly, if I am in the salon and a mother comes in with a child that won’t stop screaming, I will also not enjoy getting my haircut.
Lastly, the salon may be in a place not convenient for me to get to.
Solutions
To mitigate some of these risks
2. select your staff carefully and train them well
“A Number Two involves me shaving your hair to millimetres. It should look fantastic, but is quite a change. Are you sure you want me to do this?”
This would have averted the disaster.
3. Customer management strategies
If the lovely Pauline usually is accompanied by tantrum-prone Dylan, set up a special Mum’s Afternoon where a staff member entertains the kids with stories or games. Alternatively, get in a few colouring books and crayons or toys and set up a kids corner to stop them getting bored and disrupting others.
- More sites?
If it is feasible, you can either do an at-home service or even be available in another more convenient area one or more times per week.
Variability
All people have good days and bad days. One day they may be chatty, the next sullen and withdrawn, the next cranky. Or tired.
Services vary with every user experience. Quality is particularly hard to control.
Solutions
4. Standardisation / Customisation
There are two options: Standardisation or customisation.
Stndardisation is a one size fits all approach and has a lot of merit. It is much easier to product procedures and checklists if everyone gets the same and you excel at providing it.
Customise the service
On the other hand, you could consider customisation of all services and give staff higher training and also freedom to judge and give input with the customer to provide the best solution.
One benefit of this can be higher staff satisfaction translates to higher customer satisfaction. However, you need to select and train your staff well. Not everybody may have the interpersonal skills required, such as empathy, listening skills, communications skills or expertise.
Perishability
If my holiday house does not get booked for a weekend because of wet weather, I can’t rent it twice the following weekend. That ‘service’ is gone.
Problems
Demand can be greater than available staff (or resources) or greater than the optimal level.
Or it can be Lower.
And it will vary.
Solutions
5. Creative pricing
If the restaurant is packed at dinner time, give an Early Diner’s discount to even the load on kitchen staff. Or a late dinner bonus drink.
Reservations Although not fool proof, some expectation and scheduling of customers should help.
6. Complementary Services
If my hairdresser doesn’t take bookings because of the extra hassle, he may provide me with a complementary service, such as an espresso with a delicious chocolate cookie. For $10. This way I am happy to wait, and he is making another revenue stream.
7. Non-peak activities
When the salon is not busy, my hairdresser might use the shampoo apprentice to deliver some flyers about the new hair care range to nearby homes or businesses.
8. Customer participation
If your demand overwhelms your supply, you could consider involving your customers more. To save on staffing costs, many ‘family eateries’ have self-service salad bars and drinks bars.
Japanese ‘kaiten zushi’ (or sushi-go-round) does this. You pick up the food that appeals as it passes you on the conveyer belt. Some Australian steakhouses encourage patrons to ‘cook it the way you like’, as do some Korean Kim Chee eateries.
9. Third parties
If my hairdresser decided he really needed to have scheduled appointments, he may decide to use a third party to manage the phone calls and send a confirmation text message one day prior.
Outsourcing to third parties will ensure irksome admin jobs are out of the way and done well. This will allow you to focus on your key skill.
I hope this gives you some new ideas for managing your service business.