Top Reasons Why Customers Do Not Buy Services

Why don’t customers buy services? Because they believe they do not need the coverage or that they do not feel that the costs outweigh the benefits. Selling the value of service is making the case for why the customer is better off with it than without. Selling services demands that you establish a credible and compelling value proposition.

Overcome Customer Objections

Selling the value of service is making the case for why the customer is better off with services than without. Selling services demands that you establish a credible and compelling value proposition to equip your sales channels with the knowledge and skills to overcome customer objections.

Top Reasons Customers Do Not Buy Services

Why Customers Don’t Buy Services

The primary reason customers do not buy services is that they do not feel that they need what is offered. Sometimes customers do not buy services because they are simply not given the opportunity to do so. In other cases, customers react to the cost of services and feel the price is too high, or they simply cannot afford to purchase a service contract.

When customers express that they do not need services there is also a consideration for the price they are asked to pay.  If services were free, then they would most certainly take the services.  This “I can do without” attitude combined with some degree of price sensitivity demands that we equip our sales channels with the knowledge and skills to overcome customer objections.

Establish a Compelling Value Proposition

The value proposition describes the relationship between the price and benefits from the services a customer receives. To be compelling, the benefits must be perceived to exceed the cost. Service benefits may be intangible – insurance against risk, or tangible – a commitment of specific resources or attainment of a specific outcome.

Although difficult, it is imperative to quantify the value of all service benefits so that they can be compared to the price. A compelling value proposition is fundamental for successful sales and renewal activities. Selling the value of services requires the following:

  • Understand your customers’ needs and expectations from the product and services they purchase from you.
  • Offer a robust portfolio of services. Not all customers will need or benefit from the same types of service so develop offerings that can align to the customer segments you serve.
  • Set reasonable prices for your offerings. This does not suggest that reasonable is low, but it must be justifiable. Customers must understand and agree that the benefits of service are consistent with the price they pay.
  • Define a clear and compelling value proposition.
  • Help sales channels and renewal teams understand the elements of the value proposition so that they can clearly articulate it to customers during sales and renewal activities.

Featured: Selling Service Value

Selling services demands that you establish a credible and compelling value proposition. To be compelling, the benefits must be perceived to exceed the cost. This playbook describes the essential steps to develop a compelling value proposition to maximize support sales and renewal activities.

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*Membership level determines your access to ServiceXRG research and other member services. Paid memberships include access to research and playbooks. Free memberships include access to some reports and discounts to others. Please visit our membership page for a list of available membership programs.

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Top Reasons Why Customers Do Not Buy Services

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How Much Should You Charge for Support?

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How Much Should You Charge for Support?

Setting the correct price for your support programs begins with a baseline understanding of what your market will bear but ultimately the price must be based on the type and level and entitlements offered.

Average Support Program Price

The average prices for support programs range from 15.6 percent for a basic level of support to more than 26 percent for a high-end premium program.  Prices vary based on the entitlements offered and the ways that pricing is structured.  Here are a few considerations:

Net vs. List

Pricing may be based on the percent of a products’ list price or the net price after discounts.

Add-on’s and Fixed Fees

Some support programs consists of a fee tied to the percent of product list or net price plus add-ons.  Add-ons are often associated with optional entitlements such as named support resources such as designated support engineers and/or account managers.

Adjustment Fees

The price of support in the first year is often not the price a customer will pay in subsequent years.  Support prices typically include annual adjustment fees to account for inflationary factors.

Pricing by Support Program Tiers

Support pricing is typically established by program level or tier.  It is not uncommon for support portfolios to consist of two or more tiers with names like Silver, Gold and Platinum.  Although support programs may sound alike, they often vary from vendor to vendor.  For the purposes of establishing baseline pricing benchmarks ServiceXRG has normalized support programs into the four distinct tiers described below.  Classification is based on the underlying program entitlements and not on the program names.

Support Program Tier Classifications

Average Support Program Price

Establishing Support Prices

The price of support must be set at a level sufficient to cover delivery costs, yet not too high to discourage customers from buying.   Customers are likely to have preconceived ideas about what support should cost based on experiences they have with working with other technology vendors.  If your “gold” support is priced at 23% of product list price but other vendors are priced at 18%, customers may perceive that your prices are too high even though you offer more for the price. 

It is imperative that you price support reasonably so that you can make a compelling case that the benefits outweigh the costs to the customer.

Making the Case for Services

Selling services demands that you establish a credible and compelling value proposition built upon the entitlements customers want and need from services balanced with a reasonable and justifiable price level.

Featured: Selling Service Value

Selling services demands that you establish a credible and compelling value proposition. To be compelling, the benefits must exceed the cost. This playbook describes the essential steps to develop a compelling value proposition to maximize support sales and renewal activities. Log-in to get your copy.

Login to Access the Full Report

If you don’t have an account, create a free* membership.

Login

*Membership level determines your access to ServiceXRG research and other member services. Paid memberships include access to research and playbooks. Free memberships include access to some reports and discounts to others. Please visit our membership page for a list of available membership programs.

Related Articles

Top Reasons Why Customers Do Not Buy Services

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read more

How Much Should You Charge for Support?

The average prices for support programs range from 15.6 percent for a basic level of support to more than 26 percent for a high-end premium offer. Setting the correct price for your support programs begins with a baseline understanding of what your market will bear but ultimately the price must be based on the type and level and entitlements offered. This article offers guidelines for setting the right price for your support programs.

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Should you charge for support?

If you want to make money from support, you need to charge for it and most technology companies do. The majority (89.7%) of technology companies offer some form of fee based support option.

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If you only care about the first-year revenue from support and maintenance contracts, then any attach is a good attach. If you want to maximize revenue from the support annuity , then contract attach followed by a successful renewal is essential.

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Making the Case – Overcoming Customer Objections to Buying Services

A credible value proposition based on what customers need and want from Services is the best way to overcome customer objections to buying services.

Making the Case for Services

Customers want the products they purchase to work.  Many understand that technology is inherently complex and access to expertise and periodic updates are worth the investment.  This is particularly true if a product is considered business critical. Some customers conclude that they need Services on their own, many do not however and need to be convinced.

Selling the value of service is making the case for why the customer is better off with service than without.  Selling services demands that you establish a credible and compelling value proposition built upon the understanding of what customers want and need from services.

Top Reasons Customers Use Services

Customers that purchase services are most likely to use them to adopt and use products effectively and not simply to fix problems. 

The value of services must therefore emphasize Services’ ability to provide tools and resources to help customers implement, learn and use product effectively.  A complete and compelling value proposition must also recognize that if product issues do arise, services are available to respond quickly.

Top Reasons Customers Use Services

Most Important Attributes of Service

The services characteristics customers want most are access to expertise when they need it. They expect service organizations to be available during reasonable hours and to be responsive to requests for help.  As noted above, access to technical expertise is not simply about fixing issues, it must also be used to provide training and coaching to help customers apply products more effectively. 

Most Important Attributes of Service

Featured: Selling Service Value

Selling services demands that you establish a credible and compelling value proposition. To be compelling, the benefits must be perceived to exceed the cost. This playbook describes the essential steps to develop a compelling value proposition to maximize support sales and renewal activities.

This Playbook is FREE – Log-in to get your copy.

Login to Access the Full Report

If you don’t have an account, create a free* membership.

Login

*Membership level determines your access to ServiceXRG research and other member services. Paid memberships include access to research and playbooks. Free memberships include access to some reports and discounts to others. Please visit our membership page for a list of available membership programs.

Related Articles

Top Reasons Why Customers Do Not Buy Services

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How Much Should You Charge for Support?

The average prices for support programs range from 15.6 percent for a basic level of support to more than 26 percent for a high-end premium offer. Setting the correct price for your support programs begins with a baseline understanding of what your market will bear but ultimately the price must be based on the type and level and entitlements offered. This article offers guidelines for setting the right price for your support programs.

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Bad Attach?  Is There Such a Thing?

Bad Attach? Is There Such a Thing?

If you only care about the first-year revenue from support and maintenance contracts, then any attach is a good attach. If you want to maximize revenue from the Support, then contract attach followed by a successful renewal is essential.

The Relationship Between the Initial Attach and Successful Renewals

Attach Rate measures the effectiveness of new support contract sales activities (direct or through partners) by reporting the extent to which a support contract, beyond what is included with the product, has been sold as part of a new product sale.  When you sell a new product, you expect to attach a support or extended warranty contract.  It seems intuitive to assume that it is a good thing when you sell support with a new product.

It is likely that mixed in with those newly attached support contracts are several that are at risk from the start.  What puts these support contracts at risk is the way that they were attached.  When customers unknowingly buy support with a product, or reluctantly buy support to gain greater terms on the initial product purchase (e.g. a discount or promotion) they are immediately at risk of not renewing.

The good news is that you get the first year of maintenance revenue, the bad news is that you may not get the benefit of the annuity from year after year renewals.  In most cases bad attach can be avoided.  The first step to minimizing bad attach is to recognize if you have Support sales practices that lead to it.

Signs of Bad Attach

Customers are incented with steep product discounts if they buy support.

  • Sales promotions offer attractive deals on products but require automatic attach of support.
  • It is a common practice to include support without any effort to explain the benefits to customers.
  • Support is compulsory.
  • First year renewal price is adjusted upwards to make up for initial discounts due to pricing tied to product net price.

All these scenarios share something in common – the benefits of support were not sold and justified to the customer at the time of initial attach.  When customers do not understand the benefits of support, or worse, don’t know that they have support, they are likely to question its value when the renewal notice arrives.

How to Avoid Bad Attach

  • Make sure that customers understand that they are purchasing support – don’t try to hide it, they will figure it out upon renewal.
  • Always convey the benefits of support at time of sale.
  • Avoid discounts to support, especially if the discount is for the first year only.
  • Be aware of sales promotions that will attach support even when customers do not want it – you will get the attach but not the renewal.

If you only care about the first-year revenue from support and maintenance contracts, then any attach is a good attach.  If you want to maximize revenue from the Support, then contract attach followed by a successful renewal is essential.

Featured: Selling Service Value

Selling services demands that you establish a credible and compelling value proposition. To be compelling, the benefits must exceed the cost. This playbook describes the essential steps to develop a compelling value proposition to maximize support sales and renewal activities. Log-in to get your copy.

Login to Access the Full Report

If you don’t have an account, create a free* membership.

Login

*Membership level determines your access to ServiceXRG research and other member services. Paid memberships include access to research and playbooks. Free memberships include access to some reports and discounts to others. Please visit our membership page for a list of available membership programs.

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Why Customers Don’t Renew

There are many reasons why customers choose to cancel their service relationship. The most common reason for cancelation is that they do not perceive that the benefits outweigh the cost of continuing the service. Or, they do not feel that the risk is too great to cancel – this is a common perception by customers that use mature products. The least likely cause of customer cancelation is poor service quality.

For customers that cancel because they did not see the value in your services there is still hope for a win back. If these customers are still using your product re-engage them and attempt to convince them of the benefits of your service. You may learn a lot about why customers canceled in the first place (price, lack of use, etc.). Consider making modifications to the service to make it more appealing.

Within your active customer base chances are good that you have customers that would like to cancel but are not willing to accept the risks associated with lack of service or out of date software. In these situations, there is still time to protect the relationship. Work with customers potentially at risk to help them see the value.

The second most common reason for service cancelations occurs when customers stop using your products. Once this occurs – for whatever reasons – there is little to do to win the customer back. The best strategies to minimize cancelations due to lack of use is to develop good onboarding, adoption, and success practices to make sure customers can use and apply your products effectively.

Keep the customers you have and find ways to prevent customers from canceling services in the first place. Retention is paramount – make it a strategic priority!

Login to Access the Full Report

If you don’t have an account, create a free* membership.

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*Membership level determines your access to ServiceXRG research and other member services. Paid memberships include access to research and playbooks. Free memberships include access to some reports and discounts to others. Please visit our membership page for a list of available membership programs.

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