These days we depend heavily on various Service Platforms that are crucial to our business, relationships and development. If we stop to think for a moment this dependency and cost can be threatening. Because of low competition between key actors the service margins are massive compared to those used in the good old days. For example, sales commissions of 20% are not uncommon these days. Is there a way out of these Service Platform bondages?
An article by Benjamin Edelman, Mastering the Intermediaries from the June, 2014 issue of HBR, is dedicated to outlining some strategies that may help to extract the higher value we are looking for and to pay an adequate price to service platforms. Despite the obvious strength of the major Service Platforms, the author believes that their supremacy needs to be challenged and it is likely worth the effort.
The bargaining power of Service Platforms may contain some holes and weaknesses. The following areas can be considered:
Completeness: Service Platforms are more ready for special terms if they do not provide complete coverage in terms of services or geographical area. These contributions might be considerable, down to free of charge servicing.
Presence of Discrimination: Manipulation of data and voluntary interpretations of the law by Service Platforms are unfortunately commonplace in the “new industries”. Identify these misdoings, point to them and try to use in your own favor.
Development of Alternative Platforms: In some cases, just the participation in new alternative concepts may help to negotiate favorable service terms and fees from existing Service Platforms.
Back to Direct Distribution: This may sound old-fashioned, however we do have multiple examples of successful setting of your own distribution systems that generate value for your customers. For example, Nescafé stays with its direct-to-customer model for its brand Nespresso, despite the temptation of market growth.
On the other hand, Service Platforms are becoming more advanced and experienced in sustaining their market positions by selecting and developing relationships with their ideal partners, those who are satisfied with their service and are not looking for other service suppliers. Variable agreement renewal periods, bundling of services and seemingly “free offerings” are all used to lock in these ideal service buyers.
The author also suggests interdisciplinary teams to run this never-ending battle with Service Platforms to fight their un-proportional profits and to get at least some value out of them. Read the full article at: