Potential clients often have difficulty evaluating service offers as they need to come to grips with an intangible product.
In developed nations like Australia, services underpin economic growth.
A World Bank study has shown that in high-income countries, services represent 66% of GDP compared with 35% in low-income countries.
In Australia, more than 8.6 million people work in companies providing services, representing 76% of the workforce. Yet services can be hard to understand and define, so are not easy to sell.
Professor Valerie Zeithaml of Texas A&M University says professional services exist on the “extreme intangibility” end of the tangibility spectrum, and that the “product” of a service is often the result of many years of specialised study and training. As a result, clients often have difficulty evaluating service products.
Enter competitive tendering. Since the 1980s, this system of buying has grown quickly, and now most contracts of any size and value are transacted through bids and tenders. In 2014-15, one of Australia’s largest buyers, the federal government, spent $59.447 billion buying goods and services through Austender, and issued 69,236 supplier contracts.
The competitive tendering system is particularly challenging for people selling services. Many services – including health and human services, large-scale enterprise services, and professional services – are complex and time-consuming to perform. This, unfortunately, also makes them complex and time-consuming to explain.
Selling services under pressure
In competitive tenders, service providers are under constant pressure to move straight into unpacking methodologies and implementation plans (what and how). This often comes at the expense of explaining the problem being solved (why), which is the main reason the service is actually needed in the first place.
Understanding value is the key to selling services. Value is like a snowflake – no two commercial value propositions are ever exactly the same. This is because every customer has different hopes, dreams, goals and problems to solve. Yet like a snowflake, commercial value has a six-sided structure, and is quite beautiful seen up close.
“Value is like a snowflake – no two commercial value propositions are ever exactly the same”
Each of us buys with our gut, head and heart. Within each of these drivers, there is a left-brained (quantifiable) and right-brained (qualitative) attribute for value. When professionals with a complex offering can explain it according to these attributes, it helps people understand and want to invest in the services being offered.
Firstly, visceral (or gut) value attributes include cost and risk. Author and neuroendocrinologist Dr. Deepak Chopra says gut feelings are “every cell in our body making a decision”.
Fear as a trigger
Buying decisions are often triggered by fear. In an IBM survey of 5200 CEOs last year, 54% of them said their biggest fear was “being Uberised” disrupted by a competitor outside their industry.
Secondly, buyers value logical attributes like productivity and reduced complexity. Logic is driven by the head, and most of us have way too much going on in there to be logical about all of it. This phenomenon is known as cognitive load.
Finally, buyers value aspirational attributes like quality and connectivity as they want to make an impact and create a legacy.
With these factors in mind, service providers can be better prepared for connecting with potential clients and selling services to them.
Robyn Haydon, Author of “Value: How to talk about what you do so customers want to buy it”
This article first appeared in issue 14 of the Inside Small Business quarterly magazine
