I recently received an email from a
commercial real estate broker inquiring about how dollarization can be applied when selling a service. This is one of the more
frequent themes I see in reader inquiries.
The real estate broker’s note concluded, “Given that I’m not selling
widgets, but service, it seems a bit harder to quantify my ‘value’.”
Dollarizing a service may present unique
challenges, but there is no inherent reason why one could not dollarize a
service as they would a product.
Marketers and sellers of any offering –
product and service alike – must always remember that customers do not buy
products or services. Instead, they buy the outcomes, the benefits
that result from these products and services. And when a business buys a
product or service, they are ultimately buying the dollarized value of those
benefits.
To return to my interchange with the
commercial real estate broker, here are a few excerpts from my response to his
questions:
Whether you are selling widgets or services
(we have successfully dollarized plenty of both), there are a couple stages to
work through. You need to first identify
and carefully articulate the specific areas where you create value for
customers. Next, you need to figure out
a way to quantify those values. A
critical step is that you also need to persuade the customer that the
advantages you offer are indeed real
and unique to you.
This area can be tricky with services, as a
service is often not perfectly reproducible or predictable the way a product
might be. In those cases, you need to
discover ways to create evidence of repeatable past success, or a documented
methodology that the customer can intuitively understand as unique and
differentiated. This may mean publishing
case histories, or customer testimonials.
A difficult reality that some service
providers must face is that their service offering MAY NOT in fact be all that
different from what is available from other service providers. In those cases, it IS in fact difficult to
dollarize, because there is little differentiation to build on.
Those situations may call for a broader
strategic view: you may need to find
related ways to differentiate yourself and create value outside your
traditional realm.
As an example, a few
years back, I worked with GE Capital, helping dollarize their lending to
commercial fleets (what is more of a commodity than money?). In order to get the conversation away from
interest rate and fees, they looked at other services. In one example, they worked with a trash collection
company to install GPS devices on the fleet of garbage trucks, and then analyzed
the routes the trucks traveled. They
optimized the routes, even taking into account topography, so the fleets could
save money on fuel, brake wear and other maintenance. (The GPS devices were installed for
tracking... the innovation was to use the data to create value.) This approach not only allowed the seller to dollarize the value it created for the customer, but it made it crystal clear that the seller was looking for ways to improve the customer's business.... a powerful message for any seller.
So, the summary message to service sellers
is:
1.
You can dollarize the service you provide.
2. You must identify
the outcomes and benefits you create for a customer, and then determine how those
benefits result in financial gain for your customer.
3. You must determine
how to use your past record to create a reasonable predictor of future
performance (“we average reducing client inventory by 23%, which in your case
would mean $29,000 less capital tied up in the warehouse.”). Case studies and other carefully crafted
tools can help build this case in a believable way.
4.
If it turns out your service offering can be closely matched
by others, change your focus. Think
about your customer’s business and how you might find other ways to create
value that will differentiate you from the pack.
