Response to May 2008 Harvard Business Review article "How to Sell Services More Profitably" by Reinartz and Ulaga. www.hbr.org
In "How to Sell Services More Profitably" (May 2008 Harvard Business Review), Professors Werner Reinartz and Wolfgang Ulaga share their findings from multi-year research into a wide variety of product companies that have pursued strategies to sell ancillary services. As a sales training company, Holden is excited to see the role of sales training highlighted as the third of the four essential steps on the "Path to Profitability."
Reinartz and Ulaga refer to this step as "Creating a Service Savvy Sales Force." They conclude "the successful manufacturers we studied all took pains to retrain their sales force." Conversely, the companies who did not provide additional training to their existing sales force floundered with the new service strategy. They were unable to sell in to what Holden International refers to as "The Power Base®."
Reinartz and Ulaga illustrate this effect with the example of a European IT manufacturer who found itself in this challenging situation: "the salespeople were used to selling products with basic service contracts attached, and their traditional contacts at target firms were too low in the hierarchy to make decisions about multi-million-euro solutions contracts." This initial strategy created financial losses. Only with a major sales force course correction did they found success.
This example and article hits at the core of why advanced sales training is necessary. Even with years of successful product selling, senior sales people can be assigned to selling services and find that they need a new framework for approaching their accounts. Reinartz and Ulaga note the "longer sales cycles" and the number and levels of people involved in the decision making requires a new approach. Those companies that recognized this challenge and provided training found success faster.
In Holden's thirty year history, we have studied hundreds of thousands of sales professionals. Our experience divides sellers into 4 stages of sales proficiency. Stage I and Stage II sales professionals often enjoy lucrative careers. However, they generally find success related to servicing demand for their products and services at the opportunity level. Stage III and Stage IV professionals are differentiated by their ability and experience in creating demand. They have trusted advisor status within their accounts and are integral and committed to the riskier proposition of having to provide unexpected value to their customers.
In our experience of evaluating and training sales professionals, while it is a transition to move from a Stage I seller to a Stage II seller, it is a transformation to make the leap to a Stage III or Stage IV seller. This transformation requires them to learn to feel and distinguish the ebb and flow of influence and authority in an account - we call this "mapping out power bases".
There is no magic training wand to make this transformation happen in a training session. Rather, this transformation requires knowledge that is gleaned in training, the use of reinforcing tools post-training to see further into account dynamics, and most importantly, sales managers that are certifiably effective in coaching this level of account management.
In our experience, approximately 4 out of 5 salespeople we evaluate will initially fall into a Stage I or Stage II selling category. This supports Reinartz and Ulaga's conclusion that sales training is a critical step to selling services more profitably. To be that coveted 1 out of 5 Stage III or Stage IV seller - most of the existing sales force needs a framework with transformative powers and tools to guide them as they develop higher-order sales habits and an offensive mindset to winning business.
Selling ancillary services profitably is a challenging trend facing American and International businesses. Reinartz and Ulaga predict that it is a strong trend that is not going away for three reasons: 1) Outsourcing trends 2) Saturation of an installed base and 3) Commoditization in product markets.
With that forecast, even for seasoned, successful rosters of sales teams, it's a whole new ballgame.
