Friday, September 21, 2018

Selling Services vs Products

I decided to do a few posts about selling IT services. In this first post in the series, I want to talk about the difference between selling services and products. I believe this is vital to managed service providers, because many books and sales trainings focus on techniques and strategies for selling products and not services.

Differences in Desired Outcomes

One main difference between selling products and services is that the nature of the desired end result is different. For the most part, a product sale is a one time sale. You need a computer, you buy a computer. You need a loaf of bread, you buy a loaf of bread. The actual purchase process may or may not involve any interaction with a "salesperson." Even if it does, that "salesperson" may work for the retailer and not for your company. For this type of business, marketing and brand building is much more the focus.

There is also another type of product sales where a salesperson representing the producing company directly sells the products to consumers. Example of this type might include selling software, selling cars, selling large computer systems, etc. This model tends to be large purchases that may be one time or once every few years. In this case, the salesperson may have support from marketing and brand building, but in the end, it is the direct contact with the buyer that will make or break the sale.

On the other hand, the "end goal" is to sell a service which is typically either some project or a long-term on-going service. For most managed service providers, MRR (monthly recurring revenue) is the desired outcome for any sales negotiations. Because the end goal is not a one-time sale of a product, but rather a long-term engagement, the sales process will naturally take longer, often months. Your goal is to demonstrate to your potential client that you can solve their problems and maintain their systems in a more cost-effective and efficient manner than if they did these things themselves.

You (and Your Staff) are the Product

In the end, when you are selling services, you are selling yourself and any staff that you may have. The buyer is committing to an extended relationship with you, whether it is for a short-term project or a on-going service. This is especially true for IT consultants or managed service providers. However, it is also true for any service providers such as contractors, cleaners, babysitters, accountants, and landscapers. For services, because the individual relationships are more important, brand building and brand loyalty are less important. You might argue that insurance and tax preparation are exceptions. I would argue that insurance is actually a product. It is true that H&R bock and others have tried to commoditize tax preparation. However, many people either chose to use individual accountants, buy software, or do their taxes on their own. In addition, paying taxes is something everyone has to do, so I believe it is a special case.

Early on in my consulting career, my mentor stressed the importance of relationship building as the key to success. Over time, I began to see the process of relationship building and sales of services as a process analogous to "dating." I find it useful to use this analogy, because in most cases, the desired end result is a long-term relationship and during the "wooing" process, you want to make sure that both sides will benefit from this relationship. This is an important thing to always keep in mind during the process. You want to make sure that you want the client as much as they want you.

To me, the above differences comprise the reasons why salespeople with a background and experience in selling products, no matter how successful, typically struggle with selling services such as IT consulting. While there may be exceptions, I would recommend against any managed service provider employing a trained salesperson who does not have a technical background.

In next week's blog, I will talk about the real "product" you are selling as an IT consultant.

A Final Word

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