Do you allow your sales team to give away service to get the sale?
I learned at a young age the implications of giving away service to get the sale. When I was 16 years old, I had a part time job delivering appliances. Soon after I was hired, I came to realize the tension between service and sales.
I would hear the head salesperson say, "Don't worry sir. We will get that old refrigerator out of your house and we will do it completely free. Don't you worry about a thing!"
There was no "we". The salesperson himself was not worried because his job was done when he made the sale. He was not going to deliver it. The service department was going to make the delivery. He did not care that the oldrefrigerator was an original double door tank from hell - the "brown bastard".
The salesman did not care that the old refrigerator was actually installed and then the house was built around it. He had zero incentive to identify the true cost of delivery. We literally ended up taking it out a second story livingroom window and we risked serious injury to ourselves.
The salesperson gave the service away for FREE. And the service team - my colleague and I paid the price and we were not compensated for the inconvenience nor pain and suffering. And worse yet - the company and shareholders were not properly compensated for the value created by removing the the old refrigerator.
This was to be my first experience with a salesperson saying whatever that was needed to be said to get the sale and then other departments - particularly service paying the price for that promise.
This kind of thing still goes on 25 years later.
One cannot blame the salesperson - they only do what the systems and company allow them to do. Furthermore, most companies create a service department as a reaction to solve Customer problems - not as a proactive strategy to add value to the Customer. For most companies, the service department is the "red headed stepchild".
If this sounds like you, it is time to make a change.
Non strategic CEOs give service away or charge breakeven prices.
Smart CEOs turn the service department into a profit center and they bill everyone - particularly the sales department for services rendered.
Following are six things you can do right now to stop giving away service and recapture the value the sales department used to give away.
- Create separate internal profit and loss statements to create awareness of a "bottom line" responsibility for the service department.
- Incentivize the existing VP of service to pay attention to their profitability.
- Provide the service department the ability to internally charge for their services and then enforce it.
- Require sales to disclose where service is "given away" in invoicing.
- Shape the mindset of your Customer to believe the service you offer has value and charge separately for it.
- Shape the mindset of your service department to believe the service they deliver has value and that value must be fully-compensated.
I have come to realize the service department can be a real driver of profitability for any business. The key is for the CEO and service department to commit to transitioning from a breakeven or loss center to a profit center and then charge both internal and external Customers for that service.