Saturday, June 7, 2008

Is Your Company's Reason for Being Increasing or Decreasing?

My wife heard a radio commercial from Best Buy this week, saying "If you buy your GPS at Best Buy, we'll teach you how to use it before you leave the store."

Brilliant!! At last, a reason to buy something at a retail store! Frankly, I've become seriously concerned about the future of retailing. The "big box" stores like Best Buy have only 2 things going for them -- they stock the products, so you can get them today, and you can see & touch the products (if they happen to be in stock).

That aside, why would you buy a commodity product like a GPS at a retail store? Online merchants stock infinitely more selection -- several dozen models times multiple vendors -- a universe of perhaps 100 different GPS models to choose from. And, depending on your perception of convenience, they bring them to your door! Personally, I like being able to research features, user comments, user ratings and price, then just order for front-porch delivery. All this for the lowest available price on the planet, usually free shipping on high-end items like GPS -- plus no sales tax!

So, Best Buy has figured out how to market an "augmented product" -- a commodity product (available anywhere, probably cheaper) augmented by the addition of a critical service -- that of helping you learn how to use it. And they've applied this idea to GPS, a product still in its early adoption curve and that's completely useless unless the buyer knows how to find his destination address. What a great plan -- a way to increase the reason for being of an electronics retail store, a business model whose reason for being has been steadily eroded by a decade of migration toward online channels.

Have you taken a look lately at augmented product opportunities in your business? What service could you offer to your customers to set yourself apart from other competitors? Look at things the customer has to do before, during or after he uses your product. Is it design? Is it inventory? Is it training? Is it field service? Or something else?

If you're in a service business, are there products your customer needs before, during or after you provide your service? Could you deliver those as an augmentation to the service you're now providing, and take a margin on them? You're there anyway and you have a relationship already.

The Internet has become the great disintermediator. It has evaporated the reason for being of many businesses, particularly those formerly occupied by agents, reps, distributors or retailers. If you're in one of those "middleman" channels, you're in the gunsights of the Internet, and your business is likely to be next. Mount your defense in advance by augmenting the product you provide with services your customer needs, thereby providing an indispensable combination and increasing his "switching costs" -- he has to find and coordinate more than one vendor to replace you.

So, just when I thought big box retailing was an endangered species, Best Buy came up with a way, in at least one product line, to increase its reason for being. Way to go, guys!

If you have examples of how you've augmented your products with services essential to your customers, please click on Comment below and share them with us.

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Terry Weaver

Chief Executive Boards International
864 527-5917

Chief Executive Boards International: Freedom for business owners & CEOs -- Less Work, More Money, More Freedom to enjoy it

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