The Product-Service Shift

By Lain Chroust Ehmann

With average services margins running around 62 percent, compared to standard product margins of 15 to 30 percent, it’s no wonder companies are looking at services to fatten their wallets. But it’ll be a challenge for sales forces to adapt to this new business model. The sales lifecycle, compensation scheme, mindset, and cost of sales are all substantially different when selling services. “The difficulty is the product people have historically given away is services, so they’ve never really learned how to sell them,” says Mark Hordes, co-author of “S-Business: Reinventing the Services Organization” (SelectBooks, 2003).

Hordes and his co-author, James Alexander, have developed the following Ten Commandments for selling s-business in order to help companies develop a winning services sales force:

Clarify complex customer issues. In the services arena, problems are multifaceted and multi-departmental, says Hordes. “It’s multi-layered; it’s not just pinpointed solutions.” Salespeople need sophisticated listening, questioning, and analytical skills to clearly articulate the customer’s issues.

Communicate the invisible. When you don’t have a product to demo, you have to understand how to position the team’s credibility – to “sell the invisible” – in order to ease the customer’s concerns, says Hordes.

Customize each solution. Nothing in the professional services arena is one-size-fits-all, says Hordes. “Most services buyers feel their situation is unique, especially at the C-level. The message back to them has to be very customized.”

Commit high-level execs to action. Selling services typically involves multiple players in different roles, and can take twice as long as selling products, explains Hordes. Salespeople must learn to master a more complex sell to a higher-level audience.

Coordinate the selling team. There are few star quarterbacks when selling services. Successful services salespeople work together and leverage the expertise of other team members to best meet the customer’s needs.

Compress the cycle time of selling. The keys to compressing cycle times are qualifying good business and using key events to demonstrate account interest, says Hordes. Know your ideal business, and don’t waste time and resources on impossible sales efforts.

Concentrate on the stars. While product people can indeed sell services, around thirty percent won’t make the leap due to lack of interest or ability, says Hordes. Concentrate on your top performers. Hordes and Alexander recommend investing 40 percent of your time working with your very best, 50 percent teaching average performers what you’ve learned, and 10 percent with the laggards.

Control the cost of sales. Many companies don’t even track the cost of sales, says Hordes. Make sure to tally costs, and then shoot for a margin of at least 40 percent.

Commercialize the sales promise. Sales and marketing efforts must be closely aligned. Everyone with customer contact must clearly understand the company’s services value proposition, its market message, and services strategy.

Continually learn and grow. In a knowledge-based industry, obsolescence happens overnight. Continuous learning is essential to business success. “Six percent of revenue ought to be dedicated to training,” says Hordes. “Knowledge gets stale very fast.”

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