"How to Sell Services More Profitably"As a follow-on to the post of a couple of days ago citing Jeff Bezos' views concerning building skills that enable meeting previously unmet customer needs, I'd call attention to an article in the May 2008 issue of the Harvard Business Review that makes a similar point.
Werner Reinartz, who teaches marketing at both the University of Cologne and Insead, and Wolfgang Ulaga, who teaches marketing at HEC School of Management in France, describe a four-stage process followed by companies that make a success of expanding their sales of services.
The initial stages are (1) beginning to charge in a strategically planned way for services already provided to customers (e.g., delivery), and (2) developing back office processes that provide "service platforms flexible enough to fit individual customer contexts" without being so customized that profit margins are depleted. Reinartz and Ulaga cite the example of Air Liquide, which "taught managers and frontline employees in operational units how to systematically take costs out of service production and delivery processes while making sure that customers still got what they expected."
Training also has a prominent role in the third stage, in which the sales force existing or new learns how to handle the relatively complex process of closing service sales. Key capabilities center on being able to document and explain the benefits of the company's services to senior people at customer accounts. Reinartz and Ulaga cite the example of Schneider Electric, which
switched the focus of its salespeople from cost-plus pricing to value-based pricing when promoting its services. This involved educating them about how their customers' managers justified decisions internally, so that the salespeople could help the managers they dealt with take more responsibility for shaping decisions.It is in the fourth and final stage that the issue of building new capabilities for competing in service sales comes very much to the fore. In this stage, the company moves "toward addressing customers' problems and processes holistically. This means shifting focus from their own processes, incentives, and structures to those of the customer." The necessary expertise for solving customer problems to the customer's satisfaction is likely to include skills that the company does not already have, and that it therefore needs to build.