Three Quick Ways to Increase Service
Did you know that only 10% of buyers make their buying decision based on price (see chart below)? Itís true. Studies in both the consumer world and in high technology services show that 90% of buyers choose what to buy based on things like product quality, product features, quality of customer support, and liking the sales person. Only 10% of buyers choose based on price, and those buyers are quick to move to any vendor that offers a lower price. They are not loyal customers and will continue to ask for further price concessions for as long as a vendor continues to give in to the pressure. In high tech services specifically, the choice is made on perceived need. Despite what your sales people are telling you about "your ridiculously high service prices" causing them to lose sales, the truth is that less than 1% of customers say that the price of service is a factor in their decision to buy a product. Of course, thatís not what they are saying to your sales team during negotiations, but it is important to realize that this is just that - negotiating. When asked after the fact why they selected a product, so few customers mention the price of service that it cannot even be statistically measured.
Rather than reward your problem customers for tough negotiating, you should be rewarding your best customers. In other words, replace negotiated discounts with earned discounts. There are several types of earned discounts that can be offered. Most companies offer a multi-year discount if the customer will sign an agreement that extends over several years. This can take the form of locking in the current price for the full length of the agreement, or offering, for example, 10% below the list price each year of the contract, or 10% below the current price and no increases for the duration of the agreement. At Hahn Consulting we generally recommend a version that provides for some modest increases each year so the customer doesnít experience sticker shock when it is time to renew. Otherwise, renewing the contract can become an even greater challenge than the original sale. Other types of earned discounts include an allowance based on the dollar volume of the customerís service business or taking something out of the service offering to account for the lower price.
It is helpful to recognize that in some cases buyers are compensated for the concessions they get from vendors, or perhaps are the type of personality that just has to "get something" from the vendor. This can usually be addressed by allowing sales people to give a 3% to 5% discount at their discretion. Remember, price is not really the deciding factor, so it does not take a large percentage to satisfy these situations.
Now raise your right hand and repeat after me, "No more negotiated discounts."
Telesales is a widely overlooked technique for increasing service
revenue. The mere word "telesales" is usually met with groans
and unprintable words, probably due to the universal dread of the
dinner-time phone call at home from consumer sellers. However, done
professionally in the corporate environment by well-trained people, it has
proven to be a highly successful sales model for services. A few years ago
the Hahn Consulting Best Practices Case Studies report included a story
about the phenomenal success of Oracle Systems at selling, renewing, and
upselling software service agreements via telesales. At that time,
individual telesales representatives were meeting quotas of multiple
millions of dollars - over the telephone!
While it may seem counter-intuitive to take sales people out of the
field for even a day when sales are down, the return on investment can be
both awesome and immediate. Whether the responsibility for selling your
services lies with the product sales team, a dedicated services sales
team, or some combination of both, chances are they are relying on
traditional techniques they have learned for selling physical products.
Unfortunately, those techniques just donít work very well when selling
services, which are intangible. While a product can be seen, touched, and
demonstrated, a service is really a promise to do something in the future.
The customer must make a leap of faith when first buying a service from
you, so some different sales skills are needed for this type of sale.