New Models for Selling Services

by Al Hahn
In my earlier days in the industry, I sold services as a customer service engineer, a regional service manager, a national services manager and a vice president of customer services. As a consultant, I have been advising and training others to sell services for over 28 years. Before each in-house class, my training partner, telephones several people that will be attending our service sales class and interviews them to better understand their specific challenges. I usually interview a service sales or marketing manager to better understand their service offerings, market strategy and their competitive positioning. These interviews give us an insider's perspective on the issues our clients are dealing with and the ways that they are coping. We have noticed different service sales models in use today and I'd like to share some of this information.

Different Models For Different Services

First off, some services fit different models. Professional services have not generally been sold successfully by product sales channels or even by traditional service sellers. They often require a dedicated sales force. This is because they are less tangible than traditional services, often customized, require higher levels of approval and have longer sales cycles. We have seen successful use of team selling, with a separate professional services group working with product sales people to address the unique attributes of professional services with the customer, generate the proposal and minimize discounting. Since, in general, professional services are generating margins well below those of traditional services, the use of either separate sales forces or teams appears to be essential to success.

There are also packaged services and warranty uplifts that are specifically designed for selling in distribution channels by resellers. These are of the "service-in-a-box" variety.

A New OEM Service Sales Model

For manufacturers selling traditional services directly, we have seen the evolution of a new model, as shown in the attached OEM Service Sales Model (Figure 1).
New Models for Selling Services
It displays the intermixing of product sales people, service telesales, customer engineers, service managers and service sales specialists in relation to size of account and point in service lifecycle. For example, during the product sale and into the warranty period, product sales, and for larger accounts, service managers and service sales specialists, are recommended to carry the responsibility to sell services. This model also attempts to optimize the sales cost with the expected return in order to reduce costs and improve service sales efficiencies.

From approximately the end of warranty onward, we recommend the use of telesales to sell the "easy" accounts. We have found telesales to be incredibly effective and very inexpensive. Recently, we have seen amazing results of service telesales operations in the UK, France, Germany, Latin America, Australia and even Japan. Often, these groups grow out of clerical staff in headquarters operations calling for contract renewals, but they are much more effective when managed as sales operations. Also, some companies are using their customer engineers for the easy accounts, although this is much trickier than telesales, and may not be as cost-effective as it sounds. Service engineers are expensive to recruit, train and support in the field. Besides, they usually don't like selling.

Major accounts are more complex and hold greater financial rewards, so they are usually targeted by service managers or service sales specialists. This makes sense, and we see many more of these specialists who only sell services. They are more expensive, but, if selected and trained properly, are our most effective service sellers. Often they are deployed on a regional basis. More and more, they are being compensated the same as product salespeople. Many of them also handle daily sales support chores, greatly reducing headquarters traffic and providing more responsive help to the field. A note of warning, however: We are seeing a shortage of qualified candidates that will only worsen over the next few years. If you plan to add service sales specialists, start early and plan on doing a lot of training and development. There are not nearly enough to meet the demand.

The Payoff

How well does this new model work? Oracle has achieved $ millions per year per person with its telesales people selling support contracts on the phone. One of our clients has seen its services revenues increase 60 percent in six months in Germany, and is experiencing double digit growth in service revenues worldwide. In conjunction with improved service marketing and updated services, we are seeing a service "renaissance" in companies that had previously experienced declining service revenues. It does take some investment, but it is a relatively easy one to justify because the results can be readily measured. When service sales go up, it is working! Telesales, in particular, can be financed with a very small up-front cost and then expanded out of increased service revenues.

If this sounds too easy, don't let that deceive you. In most cases, it really is easy to supercharge your service sales effort. After all, how many of us have a truly great service sales program in place now? When was the last time that you updated your service sales model? For most companies, a little improvement in technique would produce an explosion of results. Give it a try, you won't be disappointed.