Overcoming challenges to selling services

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Direct selling is a timely and costly proposition.   When it comes to product sales, the probability of success through direct selling is approximately 10%.   These means a salesperson would need to have a meaningful conversation with at least 10 prospects before one became a customer.   The probability of success is much lower, closer to 2%, when it comes to services.    One of the reasons is because products have a well-defined form fit and function while services do not. As a result, it is a lot easier for the prospective customer to understand how a product will enhance their life or business. In other words, they can appreciate how having the product will help change their situation.

A bigger challenge when it comes to selling services is that most people think they already have enough.  Let’s take an example a service we are all familiar with, insurance.   Has an insurance salesman ever called you asking you if you want to buy any insurance?  I would image they called you around the dinner hour and you were not that interested in speaking to them.  They probably tried to sell you more coverage, maybe with the promise of reducing your premium payments.  Unless you really needed more insurance, I bet your response was something like “I’m happy with my current insurance carrier” and/or “I don’t have time for this right now”, or “saving a few extra dollars a month isn’t worth the time and effort of taking a physical and completing the paperwork”.

Sound familiar?  You probably have little incentive to buy more insurance, especially if you believe you already have enough.   Would you be surprised if the same dynamic exists when it comes to purchasing other types of services like professional services, hardware support, or logistics, etc.?  Probably not!  I’m sure you’ve heard similar types of objections, like “we are happy with our current provider”, “we don’t see any reason to change right” now, or “its takes too much effort to change”.

Fortunately, there is a way to change this pattern and improve your chances of winning new business. It’s called “Education Based Marketing”.  It uses a number of different indirect selling tactics to create interest, build demand, and lead prospects toward taking action.  Examples of indirect selling include websites, brochures, newsletters, press releases, and article placements.

To understand how education based marketing works let’s look at the insurance example again.   Let’s say that you have reached a point in your life where you are starting to think about retirement and you are in search of an investment that protects your principle and produces a reasonable, guaranteed rate of return.  Now suppose one Sunday morning you are reading the “Lifestyle” section of your local newspaper and you see an article about retirement planning. The article describes challenges, concerns, and frustrations that people experience when it comes to investing. It also identifies various options to overcome these challenges. One of these options is insurance annuities and there is a quote from an insurance salesman, who just happens to be based in your hometown, about the types of returns that are possible with annuities and what to look for in a provider.  Now if you are planning for retirement, chances are that one of the first things you are going to do on Monday morning, after you find that salesperson’s telephone number, is call him and schedule an appointment to discuss your needs.

Compare these different approaches.  In one scenario you can’t wait to speak to the salesperson and in the other you won’t even give him the time of day.  Simply put, by using an education based marketing strategy and indirect sales tactics you pull prospects toward you rather than then pushing yourself on them. In a nutshell, education based marketing is about educating your prospects about the challenges they face and the ways they can solve them.   You still need to be able to sell once you get in front of prospective customers.  However, education based marketing helps improve your success rate because  it provides a process by which prospects self-qualify themselves and take initiative to call you.   Our research shows that prospects who engage with a company’s Education Based Marketing program are 29 times more likely to purchase and 94% more satisfied with their purchases because they are better educated about what they purchased and why they need it.  In other words, they can defend their purchase logically.

If you are responsible for marketing and selling services,then it’s absolutely critical that you give some consideration to Education Based Marketing. No doubt it will improve the effectiveness of your sales process and closing ratio.  Education Based Marketing is one of the five (5) fundamental concepts of successful service marketing that I cover in my new online training course. Last but not least, you can schedule a free telephone consultation with me if you would like to discuss how Education Based Marketing can work for your company.

Fundamental Concepts about Successful Service Marketing

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Where would we be if not for marketing?  It plays such a critical role in generating sales.  Indeed, marketing is about finding a need and turning it into a want.  For example, you may need an automobile that can transport you family to and from their activities. However, you find that you want a BMW SUV because it’s a quality car, that drives well, is safe to drive, and has a great audio system. How do you know this? Marketing!!!

Unfortunately, marketing can be a daunting task for those of us in the services industry. That’s because most of what we are taught in business school about marketing is product oriented.  Let’s face it; products are easier to market because they have a form, fit, and function. They are tangible.  Services, on the other hand are intangible. So how can you effectively market them?  Using a product approach to market a service is like trying to hammer a square peg into a round whole. It just doesn’t work.

Service marketing maybe difficult but it doesn’t have to be impossible.  To become successful at service marketing you need to understand three (3) basic strategic concepts about services:

  1. Value is based on perception: That’s right! The demand your customers have for your service and the amount of money they expect to pay is based on their perception of you. It’s your responsibility as service marketers to manage this perception through your brand and communications strategy. More importantly, their perception must be consistent with reality. Otherwise, you’ll lose your credibility. You can’t expect customers to pay a premium price for your services if the perception is that you are a low cost provider.
  2. Capability to serve versus actual service: It order to effectively market and sell services you have to give your prospective customers assurance that services will be there when needed. This means that you have to define your capability to serve before they buy and receive the service from you. Capability can be described in terms of service offerings (i.e. portfolio), processes, skills and infrastructure that make the actual service possible.
  3. Value-in-Use and Time:  Another factor that influences your customers’ willingness to purchase a specific type of service from you at a specific price is their value-in-use for that service. This is defined as the value of the service to the customer in the absence of its presence. In a service business, we often measure this in terms of time. For example, it may cost your customer hundreds of thousands of dollars if their data center hardware is down for more than 2 hours. The higher the value-in-use the more they’ll be willing to pay. Knowledge of your customers’ value-in-use provides leverage in how you price and market your services.

To summarize, it’s all about perception, time, and capability. How well do you incorporate these concepts into your portfolio design, your pricing, and your marketing communications program?  Just think about how effective you become if you do.   Let me know your thoughts.

These strategic concepts provide an underlying framework upon which all great service marketing programs are built. However, they are just the tip of the iceberg of what you need to know.  To help you succeed, I’ve created a new online course that will educate you on the fundamentals of successful service marketing. You can learn more through this link:

Successful Service Marketing ™

I encourage you to watch the brief video overview.  The course is perfect for anyone who wants to become more effective at marketing their service business.  You can also schedule a free consultation with me if you’d like to learn more.

Predictions for 2015 and their impact on Lifecycle Services – Part II

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In Part 1 – my last blog post on this subject, I discussed some of the trends that are creating uncertainty for companies who participate in the IT Service Supply Chain.  This uncertainty stems from conflicting data with respect to market drivers in the IT Industry in general and Lifecycle Services Market (e.g., hardware maintenance, asset recovery, depot repair, services logistics, etc.) specifically.

For example, more than three quarters (78%) of workloads will be processed by cloud data centers and almost a quarter (22%) by traditional data centers according to the Cisco Cloud Global Index.  In addition, public cloud and hybrid cloud will grow dramatically faster than traditional datacenters.  Most of this computing power will be housed in mega data centers.  However, IDC predicts that by 2017 industry consolidation will lead to a market comprised of only 6 to 8 mega global players.    The strategic implication is that there will be less IT assets distributed throughout the world resulting in less demand for onsite maintenance.

On the other hand, IDC predicts that IT spending on big data will grow 30% in 2015.  In addition data volumes will exceed 6 trillion terabytes.  Furthermore, data created by Internet of Things (IoT) will nearly quadruple by 2018 from 2013 creating twice the amount of data end users transmit to data centers and it will be 47 times greater than total data center traffic that exists today.  This means that there will be increased spend on data storage and network management.  As a result, services associated with the installation, management, and maintenance/ repair of storage devices and network equipment may increase.

Given these conflicting perspectives, what can companies involved in Lifecycle Services do to ensure profitable revenue growth in 2015 and beyond?   Here are six (6) things that service providers can do to achieve long term success:

  1. Have a clear understanding of your planning horizon: Remember the impact from the trends described above will not be felt immediately. They are likely to occur over a 5-10 year horizon. You need to anticipate where the market will be in the future and create a road map to get you there.
  2.  Focus on micro economic business trends: While it’s always a good idea to review market data from industry analysts, this macro level data may not reflect the actual dynamics, buying behavior, or purchasing decisions within your target market. That’s why primary market research is so important to your planning process.
  3.  Decide on where you are going to play: This requires asking critical questions about the condition of your target market today and where it is headed in the future. Will you continue to sell into a down market? Do you expand into new markets that are synergistic with your existing capabilities? Do you develop new capabilities and diversify into higher growth markets? These decisions require that you take a structured and disciplined approach to market research and strategic planning. You can no longer rely on top of the mind pontification or gut level decision making to plan for your future.
  4. Have a clear exit strategy: Regardless of your decision about your future growth, it is important to plan with an exit strategy in mind.   As a business owner or executive, you probably have good idea of the financial objectives your company needs to achieve before it exits the business. If not, you need to establish these targets right now even if your service business is a division or subsidiary of a larger company and there are no immediate plans to sell in the next 5-7 years. Exit planning will force you to consider what your business needs to look like, how it needs to operate, how it needs to go to market, what type of growth rate it needs to achieve, and how much profit it needs to generate in order to exit. The actions you take to achieve these outcomes will benefit your company whether or not it actually exists.
  5. Maintain a highly efficient infrastructure: One thing is for certain, end-customers will continue to seek operational efficiency when managing and maintaining their IT assets and related operations. It is inevitable that they will continue to place downward price pressure on their service providers. A highly efficient infrastructure and service delivery processes is an imperative for winning and keeping customers as well as maintaining healthy profit margins.
  6.  Market on all cylinders:  Your customers face these same challenges that you do when it comes to planning for the future. They are likely to be confused by all the options available to them. The way to win their hearts and minds, and share of spend in a competitive market is by positioning yourself as an expert in their market. It requires that you implement an education based marketing strategy. This approach builds trust because you demonstrate that you understand your prospective customers’ needs. When implemented effectively, it defines the criteria that your customers should consider when choosing a service provider and establishes your company as the standard by which they should consider.

Your future can be bright as long as you are prepared to do a little work to prepare for it.  It is only a problem if you do nothing at all.   One way to ensure you and your team achieve optimal success is to seek guidance from an objective, independent advisor.  With over 25 years’ experience in completing similar assignments in the High Tech Industry and extensive capabilities in key practice areas (e.g., market research, strategic planning, service marketing, and productivity & efficiency improvement), we believe that Blumberg Advisory Group possess the skills to help you succeed.  To determine if we have a solution to meet your needs visit our website or schedule a free consultation today.

Predictions for 2015 and their impact on Lifecycle Services – Part I

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I think everyone who reads this blog will agree that the IT Industry is undergoing a major transformation as end-users deploy a greater number of technologies like Cloud Computing, Mobility, Internet of Things (IoT), and Big Data solutions.  Prognostics from IT industry analysts point to an increased roll-out and deployment of these technologies in 2015.  Although these predictions bring good news for suppliers of these technologies, they bring with them some level of uncertainty for companies that provide Lifecycle Services such as onsite maintenance, depot repair, installation services, etc.

In essence, some trends suggest that there will be greater demand for IT Lifecycle Services in the future while others point to a reduced need for these types of offerings.  For example, trends which seem to have a positive impact include:

  • Internet of Things – Companies that design, build and operate networked eco-systems in industry sectors like transportation, agriculture, etc. will turn to Lifecycle Service providers for the provision of onsite and logistical services to support these platforms.
  • Big Data – The proliferation of these solutions will require additional storage which in turn will bring the need for installation and maintenance services.
  • Hybrid Cloud – Lifecycle Services are needed to support hardware refreshes and maintenance of on-premise technologies like networking equipment, storage, servers, etc.
  • Video – The use of video among consumers and enterprise is increasing and the roll-out of technologies which support this type of communication is increasing. As such, companies who deploy these solutions will continue to turn to Lifecycle Service providers for support.

The trends that could reduce the demand for Lifecycle Services include:

  • Data Center Consolidation & Virtualization – Although onsite service providers are needed to deploy these types of solutions, consolidation and virtualization means that there is less hardware to be supported in the field.
  • Pre-fabricated Data Centers – In their desire to operate efficiently, those companies that operate and maintain their own data centers will turn to pre-fabricated models which reduce the level of labor and material used in the design, build, and installation of new data center.
  • Software Defined Networks (SDN) – The transition to SDN means that network operators can build-out or enhance their networks without investing in new hardware. As a result, the need for Lifecycle Services may plateau.
  • Preference toward Public Cloud – According to the consulting firm 2nd Watch, private cloud computing is one of the least popular trends right now because it is very expensive to manage. As result, a large percentage of CIOs are opting for public cloud solutions. These will result in the reduction of end-user IT assets to be supported by Lifecycle Service providers.
  • Mobility – As enterprises continue to deploy mobile device in their workforce, we will see less and less demand for fixed IT assets like desktop computers and departmental servers along with the lifecycle services that are associated with them.

While this analysis of market trends is by no-means exhaustive, it does suggest that the market for onsite and depot repair services will remain volatile over the next several years.  This is because end-customers are in various stages of their lifecycle when it comes to the implementation of disruptive technologies.  As such, some end-customers will require more support from their lifecycle service provider while others will require less.  No doubt, end-customers will continue to seek the most cost effective provider when it comes to supporting their lifecycle service requirements.

To win in this new market, service providers must possess good market intelligence on what stage of the IT lifecycle their customers are in.  At the same time, service providers must use this information to develop and implement service offerings, delivery processes, and infrastructures that are optimized towards the needs of their target market.

In my next blog post, I will reveal in more detail the steps that Lifecycle Service providers can take to thrive under the new market realities described above.  In the meantime, please feel free to schedule a free consultation with me if you would like to get a jump start on preparing your company for future growth.