5 Questions to Ask Yourself Before Adding a New Service Line
“Always be innovating” — a de facto motto for most entrepreneurs. If you’re not in a constant state of innovation, you could become obsolete. Does that count for a new service line as well?
Take it from Toys R Us. The retailer was once a kingdom, carving out a niche in the toy world where even the biggest of big-box chains dared not compete. But when the dot-com era arrived, the toy retailer opted not to invest in its own digital space. It inked a 10-year deal with Amazon to handle online toy sales, with the digital giant eventually offering the same toys at much cheaper prices. The rest, as they say, is history. Toys R Us filed for bankruptcy in 2017 and closed its last remaining stores in 2018.
Don’t get me wrong: Building a transactional website wouldn’t necessarily have kept Toys R Us afloat. But the addition of an online service could’ve potentially given the company enough time to become a force in the virtual world — or at least keep pace with the competition.
As the market changes, opportunities to offer new services spring up. It’s up to business owners to recognize and implement these opportunities into their offerings to stay relevant with a client base, especially when it comes to service-based businesses. After all, nearly 50% of customers have stopped doing business with brands that no longer meet their needs.
Mixing Up the Mix-Up
Of course, adding service lines isn’t without its own challenges. Forced innovation can kill your business as quickly as stagnation. KIND Snacks, for example, struggled with inconsistent profits when its early focus was growth instead of product development. When founder Daniel Lubetzky turned his attention back to developing a better snack bar, he was able to secure $20 million in funding from VMG Partners and grow the business at a more sustainable pace.
Before you make major moves, you must have the proper talent, processes, and tools in place to successfully execute the offer — if you don’t meet customer expectations, you’re only shooting yourself in the foot. As a result, you need a team ready and equipped to support the addition of any new services. Hiring too quickly or too slowly can destroy your margins or lead to poor service, damaging your reputation and eroding your customer base.
Talent and growth aren’t the only hurdles, though. You also need to take care in how you position and price any new service. How does the added service affect your customer’s overall interaction with your brand? The addition might seem strategic on the surface, but it could cannibalize your other services or make your entire service line too expensive for customers. It’s no coincidence that Diet Coke continues to dip in sales after the Coca-Cola Company revamped Coke Zero Sugar. The two soft drinks appeal to the same target audience, and Coca-Cola undercut its own product by offering a similar alternative.
How Do You Know It’s Right to Add a Service Line?
Business leaders, therefore, must determine when it’s the right time to add a new service that will enhance growth rather than detract from it. The timing will vary for each business, but you can arrive at a logical decision by asking yourself the following questions:
How will a new service affect other services?
Although there’s no surefire way to determine how a new service will affect your current offerings, putting yourself in a client’s shoes is sometimes the best option. This allows you to judge whether your base might take the service as a valuable “add-on” or an alternative to your other service. And what’s an even better way to know how a new service will affect existing customers? Simply ask a few trusted clients for their opinions on how it might enhance or hinder their interactions with your brand.
Is the new service scalable?
Your team must be able to manage the additional service for it to be a viable option. Be truthful: Does your team have the capacity to meet demand? Beyond that, think about the cost and operational implications. As the service’s customer base grows, the associated costs should go down rather than up. Make sure it can actually expand your business.
Is the new service sustainable?
Scalability is often closely tied to sustainability. A new service doesn’t just need room to grow — it also needs to be worth the price for years to come in a rapidly changing marketplace. If better technology could enter the mix, you need to consider whether your service can compete for the long term.
What do employees think?
If your staff members are excited about the notion of a new service line, that’s a good sign. If it lands like a lead balloon, you might need to sell them on the service based on customer reception and your expected results. Listen to their concerns, though. Try to determine whether your team is resistant to change or has other valid concerns. If team members still don’t like your idea after some troubleshooting, consider it a sign of bigger issues.
Is the competition doing something similar?
You don’t want to be a Johnny-come-lately, but your competitors’ services can serve as a litmus test for the addition of a new service to your current offerings. Sometimes it’s best to sit back and watch. Check websites, secretly shop your competition, or just reach out to their past employees to confirm your suspicions.
Time to Test the Market
Even if all signs point to adding a new service, don’t forge ahead just yet. Your next step is to test the market. At the very least, conduct a beta test with a few clients to gauge your company’s capacity to handle the additional work.
When I wanted to add live chat as a service option for our customer base, I started with a simple test: Our team would run the chat boxes on client websites and pass on any leads qualified during the conversations.
We kept the test small at first, choosing 10 clients we felt wouldn’t ditch us if we had problems with the service. We also gave them the option to cancel at any time. After about three months of successful implementation — and an increase in marketing conversion rates of about 80% — we decided to make the service available to the rest of our clients.
Innovation and growth through offerings can help you meet customer expectations and demands, but adding services can cause as many problems as remaining limited. As long as you ask yourself the right questions and test out services on a smaller scale, you’ll be able to judge the validity of adding any new services. As long as you remember that your ultimate goal should be providing a holistically better service for your clients, you’ll be headed in the right direction.