Will someone pay for Intangible Value?

In a recent blog post, Looking for a Game Changer, Start Underperforming!, I discussed the book Uncommon Service. Next weeks Business901 podcast guest co-author Anne Morriss discusses the four universal truths outlined in the book for delivering uncommon service:

You can’t be good at everything.
Someone has to pay for it.
It’s not your employees’ fault.
You must manage your customers.

This is an excerpt from the podcast:

Joe: The next service truth is that “Someone has to pay for it.” We talk in the Service Dominant Logic^TM Thinking (Vargo and Lusch,2006) world where the value is in the use of the product. That is what attracted me to your book, the service side of everything. One of the things that is happening, we are making a transition from a product to a service focus; we’re switching from a tangible to an intangible world. The things that we are giving away free to sell our product now, are actually the things that have value because our product has been commoditized. I thought your number two service truth, “Someone has to pay for it,” addressed that. Does that really address moving from that tangible to an intangible world?

Anne: It’s such a wrenching process and an important journey for some many companies. So many companies are going through it right now ?? some of the most competitive companies in the world. GE used to sell light bulbs. Now, they’re providing energy solution, if you look at the profit?drivers in that company. The same is true for IBM. Those companies are on a big learning curve, right now, in terms of figuring out, what does it mean? We would argue it changes everything! It changes every part of your model. You have to think about the four pieces of a service model. We’re talking about in our world view, it’s very different depending on services whether you’re selling products or selling services.

The importance of culture, it matters more in services. The funding is harder in services. To your question, Steve Jobs can go into his secret phone lab and come up with the perfect phone. Most of the value of that phone is embedded in the product itself. But, when you’re selling services you have to involve customers. You have to involve employees in a very intimate way in the value creation process. All the rules are new and different.

Now the funding mechanism is a lot harder. It’s easier for us as consumers to pay more for something tangible that we can touch and feel. That’s why Starbucks charges you a lot for that drink that’s sitting on the counter even though a big part of the experience is the beautiful space, and the comfy chairs, and this third space that Howard Schultz envisioned that was just as nice if not nicer than your living room, and filled with beautiful people, and inspiring in terms of your productivity.

It would be absurd to put meters next to those chairs. It’s a lot easier to charge five dollars for a cup of coffee. That’s one of the challenges that service companies have to wrestle with when you’re talking about this kind of intangible value that you can’t drop on your foot. How do you get people to pay for it?

Our basic message is you need pricing that’s simple, transparent, and fair. The other piece of it is that the answer might not be to charge your customers more. You may have to figure out other ways to fund it.

The book’s website is an excellent resource and I encourage you to take the survey and utilize the Service Design Tool located there. This is a very challenging perspective for most of us. However, I think you will find the information to be well researched and presented in a compelling fashion.