When it comes to small businesses, most sales information assumes that the company is selling some type of product. The problem is that most small businesses these days sell services. Many are professional firms such as accountants and lawyers. Numerous others are freelancers or 1099 contractors such as web designers or coaches. And many more companies only sell products to support a primarily service-related business, such as those involved in the construction trades, like electricians and plumbers. Unfortunately, there is a huge difference between selling a product and selling services. It is much harder to sell the invisible than to sell the tangible.
Here are six significant differences when you sell services vs. products.
Most services don’t come with a standard price tag like products. Pricing a service depends on the amount of effort involved, the kind of infrastructure required, and the service provider’s expertise. To come up with a price, the service provider often has to prepare a bid based upon a bunch of variables or resort to charging the customer an hourly rate.
As a consumer, you do not know precisely what you will get even after you receive a bid from a service provider. This makes the customer uneasy about not knowing the outcome of the contracted services. They may be ecstatic or disappointed with the results.
After the service is performed and if it fails to meet the customer’s needs, they can’t take it back to the store and ask for a refund as they can for a product.
The customer really does not know if the service provider is even any good. How do you know that your accountant or doctor is good at what they do?
The customer always feels that they could have found a better or cheaper service provider.
If the contract does not go well, it reflects on the service provider personally. With a product, the customer often blames the manufacturer, not the store or the salesperson.
Most product sales also come with a service aspect that is rarely discussed. With many products you buy, there are likely services such as support packages, coaching, how to install and use the product, and advice and recommendations from the salesperson.
Customers are very sensitive to making a mistake when it comes to buying services. As a result, service providers need to focus less on the features and benefits, as is often the case with products, and more on the prospect’s perceptions.
When it comes to selling services, the prospect’s perceptions are made up of three elements:
Importance of the Service
Perception Positioning
Pricing Effectively
Importance of the Service
In his book Selling the Invisible, Harry Beckwith recounts a story about the importance of delivering great service.
One morning, an executive walked into a store that sold and tailored suits on site. The store promised they would have the executive’s new suit tailored and ready for him by the afternoon.
When the executive came back to pick up his suit, the store clerk went to the back to check on the order. When he returned, he said, “Sorry it’s not ready yet.”
The executive was about ready to lose his mind. However, before he could, the store clerk recognized the executive’s frustration with the message he had just delivered and added, “Hang on, I’ll be right back in just a second,” and went to the back again.
The clerk returned a few seconds later and added, “Sorry we were a bit sloppy and missed your deadline, but we’re going to do it right now. Give us five minutes, and I promise it’ll be done.”
So, in those five minutes, the executive started wandering around the aisles, checking out other sports jackets. He found a nice brown one he loved and decided to buy it for $575. The store clerk saw the executive pick up the suit and pointed out that there were three possible ties that would go with the jacket, and the executive grabbed them too, which was another $55, plus he had to buy new black slacks since he’d gone down a size, so that was another $110. So, during those 5 minutes of waiting, the executive spent much more money in that store.
The store clerk flipped what was a significant error on their part by not meeting the promised deadline into a positive by rectifying the problem drastically by saying, “wait right here, we’re going to do it right now.” What that story highlights is the importance of improving our service.
Too many small business owners simply equate marketing with selling, advertising, and pushing goods and services out into the world. But a big part of service marketing is offering great service, which helps build awareness of your brand.
What Are You Selling?
When McDonald’s came along, they realized they were not just selling food. They understood they were selling an experience. Burger King, however, thought they were selling food and created a better flame-broiled burger without focusing on the experience like McDonald’s.
Clients Can’t Measure Expertise
Many service professionals think they are selling their expertise. However, customers can’t gauge whether the professional delivers good or bad advice.
Let’s take, for example, your accountant. How do you know if your accountant is good at what they do? You likely use your accountant because you like them, not because you have some objective scale to measure their performance against other accountants.
Since we are not experts in the field of our service providers, we can’t tell a good service provider from a bad one. As consumers, we are forced to look at Proxies which are other signs or signals that can provide us with some level of insight.
So, if you are not selling your expertise, what are you selling? The answer is relationships. Feelings and emotions trump logic and statistics that say you are the best.
Business is Like High School
An interesting thing occurs when a person goes from high school to college. High school was less about how well you did academically and more about how popular you were. However, in college, the focus changed from popularity or likability to the grade you received on a paper, your GPA, or where you ranked academically in your graduating class. However, what works in college does not work in the real business world. The business world is more like high school, where popularity and likability drive success since expertise is so hard to measure. You will get more business having a beer and laughing with a decision-maker than waving your summa cum laude distinction.
There is an interesting scene in the movie RV where Laird, a new preppy employee is asked to pitch a merger proposal to Vibe Soda. Laird spews facts and figures about the merger but never connects with the owners. Then Bob, played by Robin Williams, takes over and connects with the owners of Vibe Soda by telling a story and moving the deal along. That scene is more reflective of how real-life deals get done. Consumers love stories and are attracted to the person.
Perception Positioning
In sales, salespeople are told to push for the deal. In many cases, when you are selling services, this causes more harm than good because being pushy ramps up the fear level of the prospect. Often, removing the pressure when selling services works better. As a customer, passing on a deal is less risky than making a bad decision. This is especially true in B2B sales, where a decision-maker’s job may be at stake.
The Real Competition
Most service businesses think the competition comes from companies selling similar services. However, it is a false assumption. The real competition, when it comes to services, is the prospect themselves and the do-nothing option.
Let’s say you own a lawn care business. Your competition, in most cases, is not other lawn care companies but the prospect themselves since they could choose to cut their lawn themselves, let it grow out of control, or hire you.
Positioning Tactic – Anchoring Bias
One positioning tactic is to harness the power of anchoring by under-promising and over-delivering when you set the initial expectations. For example, consider Amazon Prime. They offer 2-day delivery, and then they do same-day or next-day delivery.
I recently worked with a construction contractor that committed in his bids to deliver his service in a few days. However, on the appointed day of delivery, he would go dark—no calls and phone calls would go directly to voicemail. He would get back in touch a day or two later, and he always had some excuse. Even though the quality of his work was excellent, I’d never refer this contractor to anyone I cared about because he always overcommitted and under-delivered.
Positioning Tactic – Status Quo Bias
Another positioning tactic is to leverage the status quo bias. Our brain is hard-wired to avoid change. For our ancestors, change was synonymous with potential danger. Service marketing needs to harness the power of familiarity.
When you are a public speaker, known as an evangelist on an issue, and you show up at every meet and greet, your name gets out into the community. Name familiarity helps tremendously with service marketing. Even bad publicity can create familiarity because people tend to forget the bad events over time, but they remember the name.
Positioning Tactic – Primacy/Recency Effect
Another positioning tactic leverages the Primacy/Recency effect. Study after study shows that, when presented with a list of objects to remember, people remember the first objects because their minds are clear and they are primed to remember. This is known as the Primacy Effect. People also tend to recall the last objects on the list because they are still in short-term memory. This is known as the Recency Effect.
One way to leverage primacy and recency is to be the first one to contact a prospect after an event or competitive bid. Since you were the first to reach out after the event, you achieve primacy, and since the event is likely still fresh in their minds, you still have recency.
Writers are always told to place their strongest arguments in the first and last paragraphs to leverage this effect. Also, advertisers pay a premium to be the first or last magazine ad. Every impression may be your last, so strive to be the first and last contact to speak to the prospect.
Positioning Tactic – Show Your Warts
As business owners, we all want to get great business reviews. But having only glowing reviews makes you less credible in the eyes of the prospect. To be perceived as more credible, you may need to show your warts.
Harvard Business School researchers Ryan W. Buell and MoonSoo Choi found that companies can attract more customers who spend more and stick around longer when they show customers the downside of a product or service. Compare your service offerings by explaining what you do well and what you may offer but also what you don’t do best to appear more honest and trustworthy, which will improve your relationship with the prospect.
“When customers have a more holistic view of the trade-offs of an offering, it helps them make more well-informed choices, which enhances the quality of the customer relationship,” says Ryan Buell.
Positioning Tactic – Focus
Focus on the one thing you want prospects to associate with your business. Unfortunately, many service businesses say they can do everything, thinking they will position themselves above the competition. However, the lack of a single focused message is really a bad thing from the consumer’s perspective. Being a jack of all trades shows the prospect that you are the master of none.
When I share this message with clients, many say their market appeal is that they are a one-stop shop. As a result, they can’t pair their value proposition message to one single focused message. To this objection, I often share the case of Dominos. Dominos cares about many things, such as being affordable, using quality ingredients, and the like. But what are they known for? Speed of delivery. “30 minutes or it’s free.”
As a service marketer, trying to stand for just one thing is pretty scary, but it is essential if you are striving to be top of mind for that one thing. That one thing needs to be your competitive edge.
Crafting a Positioning Statement
What do you want your business to be known for? There are seven questions you need to address to understand how you want to position your service business in the mind of the prospect:
(Who) Who are you?
(What) What business are you in?
(For Whom) What people do you serve?
(What Need) What are the special needs of the people you serve?
(Against Whom) With whom are you competing?
(What’s Different) What makes you different from those competitors?
(So) What is the benefit?
Example: “(Who) SteveBizBlog (What) is a business-focused blog (For Whom) for side-hustle and lifestyle/micro business owners with more technical knowledge than business skills, (What Need) who need access to simple-to-understand and digestible business wisdom. (Against Whom) Unlike business consultants (What’s Different) that overcomplicate things and charge hefty fees, we offer free and concise business concepts tailored just for small business owners (So) they can start and grow their businesses without breaking the bank.”
Pricing Effectively
My mom recently passed away, and my wife Kim and I were also remodeling our home, so we had many quality items we needed to sell or get rid of. My wife placed a few select items on Facebook marketplace for a very reasonable price. While she got a lot of tire-kickers, she was not selling many items. Rather than follow the traditional advice of cutting the price, my wife increased the price of the items that were not selling, and guess what? People started buying.
My wife’s Facebook marketing experience demonstrates that pricing is very subjective. If everybody thinks that your prices are great, they are too low. You really want about 1 in 5 people to say that your prices are too high. Of course, if everyone says your prices are too high, they likely are, but your higher prices could serve as an anchor for a service that you really want your prospects to buy.
That said, when it comes to pricing, you never want to be in the middle of the window. Offering services in the middle of the acceptable price window says that you are not the cheapest and don’t value your services as the best.
When you are the cheapest, you will get price-sensitive customers, and you can only survive on high volumes. The risk of being the low-cost provider is when someone undercuts your price. Price-sensitive customers are never loyal, and you will lose all your customers. With low margins, this strategy is deadly.
By not being the high-priced option, you are telegraphing that you are not the best. Customers that want the best and use price as their proxy will not buy from you either.
When your pricing is neither at the top nor the bottom of the acceptable pricing window, you will occupy the middle of the pack where many other service providers are all clamoring for the prospect’s business. Ideally, you want to be priced at or near the top, which feels uncomfortable for many business owners.
Remember, when it comes to services that are hard to measure objectively, prospects are looking for proxies, which are signs or signals that can provide them with some level of insight. Price is an indicator of value. If your service is the most expensive, you must be the best.
Are you trying to sell services in the same way businesses sell products?
