For both consultative sellers and their customers, profit is the name of the game. While the game is the same, the role you play in it is very different from that of your customer.
Setting profit objectives is the customer’s business. It cannot be abdicated, nor can the customer delegate it to anyone outside the company. No one who is external to a company can ever know enough about total corporate assets and liabilities—financial, operational, or human—to set business objectives based on them. Besides, your concern with a customer’s business is rarely with all of it. Your concern is concentrated on the application or use of the product and service systems with which you yourself are involved. As a result, your role is concerned with the additive effects that the value of your product and service systems can have on the customer’s profitability. You are each customer’s incremental profit improver, not total profit maker.
A customer’s primary management function is to develop strategic and tactical plans that can achieve profit maximization. Your role is limited to profit betterment. This means that you will propose your contribution from the point at which customers have finished developing their own profit plans. The end point of the customer’s profit objectives becomes your point of departure.
Every value that a PIP adds to a customer is incremental to the customer’s current values. This means that the overhead of fixed costs already being funded by the customer can be made to contribute additional values without adding to it. PIPs require no additional plants to be built, no new R&D facilities to be developed, and no new customer sales managers or representatives to be hired. PIPs make the customer’s current overhead more productive and less costly, leveraging small investments into significantly higher returns.
This is why consultative sellers propose in terms of "contribution." It is not their own ability to contribute profits they are proposing. Instead, they are being consultative in helping their customers produce a greater contribution from current assets.
Value-Basing Customer Investment
Whatever a price is attached to is called the product. It is the thing sold; it is what the customer is asked to pay for. Vendors affix a price tag to hardware or software or a system that combines both of them. Consultative sellers eliminate the concept of price, replacing it with an investment to apply products, services, or systems at a profit to their customers. In this way, the investment is repaid by the value that comes out of it. The cost to the customer—the price—is zero.
Once price is eliminated, cost vanishes. So does fair market value set by competitive prices as a pricing standard. Value to the customers becomes the basis point for their investment, a way of doing business that Becton Dickinson has discovered about its hypodermic needles sold to hospitals. When purchasing agents were the customers, they complained that 10 cents was too much to pay for needles that they bought from competitors for 7 cents. Becton’s vendor reflex was to wage a profitless price war. But a value analysis showed that accidental needlesticks cost a hospital an average $400 each in time and paperwork charges even if there were no complications or legal expenses.
What if Becton could reduce the costs contributed by needle-sticks by more than the 3 cents difference in the price of needles offered by a competitor? What is Becton’s value to the customer? What is a fair investment for a customer to make to acquire it—fair in proportion to the value of the return, not to the price of the hypodermic needles? Should Becton sell needles on price or on the value of needlestick prevention derived from advanced needle technology, training programs for hospital staff, and consultative expertise in safety program implementation?
Hewlett-Packard made a similar discovery. In the same quarter that its earnings fell 46 percent because "pressure on gross margins prevented revenue growth from being translated into earnings"—in other words, price competition was eating up margins—an analysis of H-P’s added value showed how much margin potential H-P was leaving on the table by vending its computer systems on price and performance:
- For one customer, each $100,000 paid to H-P contributed $1.2 million in reduced costs, for a value-to-price ratio of 12:1.
- For another customer, each $250,000 paid to H-P contributed $8.75 million in new revenues, for a value-to-price ratio of 35:1.
The alternative to knowing your value and selling it is discounting your price. Once you give away your margin to make a sale, you never get it back. Discounting is relentless in the way it destroys profits:
- If you start out with a 50 percent margin and you discount it by 10 percent, you must sell 25 percent more product in order to realize the same revenues.
- If you start out with a 35 percent margin, you must sell 40 percent more.
- If you start out with a 20 percent margin, you must sell 100 percent more.
Another way to look at it is if a product’s costs remain steady at 91.9 percent of its $1.00 sales price, a 3 percent discount reduces profit from 8.1 percent to 5.1 percent—a 37 percent loss on the new price of 97 cents.
It is a myth that you can "make it up on volume." The cost of sales goes up with volume, nullifying increases in revenues. If a 3 percent discount produces an average 5 to 6 percent increase in volume, for example, it takes four cycles of 3 percent discounts to get a 20 percent increase in volume when unit costs first begin to fall. In other words, sales must increase by one-fifth just to get back to where you started.
Companies that do not understand price-value relationships go out of business. When Digital Equipment began to fall from its number two position in the computer industry, founder Ken Olsen thought he saw the reason. "We were selling computers while the customers wanted solutions to business problems," he said. "You can see at DECWorld that we’ve addressed that." But press service reports of DECWorld described it as "a showcase of the company’s innovative technology and product line."
Even innovative technology cannot help to maintain margin when the technology itself and not its problem-solving value is sold. Digital’s Alpha AXP microprocessor was the fastest high-performance computer chip of its time. Yet Digital was forced to successively discount its price by as much as 31 percent per cut over several rounds of cuts. All the while, the Alpha AXP remained the world’s fastest chip and its manufacturer remained the most ignorant about its value.
Assessing value before assigning price, and then basing price on value, is bedrock Consultative Selling strategy. Otherwise, money—often sums that are even greater than the volume of sales that are made—will surely be left on the table.
David Liddle, CEO of Metaphor Computer Systems, made this discovery after retroactively calculating the value added to nine major customers where Metaphor systems had been in place for two to three years. He found that the average revenue gain in just the 12 prior months was $8.7 million that could be directly attributed to Metaphor. For the next three years, the same customers were projecting an even greater average 15:1 annual return on their systems. Liddle’s reaction was to kick himself for having sold to all nine customers at 30 percent to 40 percent discounts from his $1.25 million price.
If Liddle had known his value beforehand and simply maintained his price, his customers would have realized more than $8 for every $1 they paid him. Instead of discounting, he could have reclaimed even more of his value at an even higher price.
If you are not prepared to improve a customer’s profits, the customer will always be prepared to reduce your own profits. After one year of operation of a Xerox Advanced Document System, Continental Insurance of Canada was approached by a Xerox competitor who offered to buy out the Document System from Continental and replace it with its own system at half the Xerox price. In order to keep the business, Xerox met the offer at a loss of over $500 thousand.
After doing the deal, Xerox went into Continental’s operations to learn what it should have known all along: in 12 months, Continental’s use of the Advanced Document System had added $17.7 million in incremental revenues at a net operating margin of $1.9 million. Yet without knowing its value, Xerox was required to compete on price.
A customer’s improved profitability should immunize his supplier against having to discount price. A manufacturing customer who is able to apply a supplier’s product to decrease his R&D’s contribution to a new product’s development cost by $1.60 million has no justification for discounting a $1.00 million price. But when the savings come from reducing the innovation cycle by 6 months so that incremental revenues of $1.5 million accrue in year one that would have otherwise been zero, it is the supplier who is justified in value-basing price.
The only way to avoid discounts is to sell your added value and not your product or service. In the same way that you cannot make it up on volume, you cannot get around it by other, less visible price offers such as sweetened payment terms, additional warranty coverage, or free training giveaways that are simply discounts in disguise.
Generating Profit Improvement Proposals
A consultative seller’s day-to-day work is the generation of Profit Improvement Proposals. Each PIP adds value to your customer’s profit objectives through the application of your product and service systems to the customer’s business operations. Through such added value, you are able to merit added margins in return.
The process of generating profit proposals must be a continuing one. Once it begins, it can go on endlessly because the profit-improvement opportunities in a customer company are limitless.
You will find the task of selecting your profit-improvement portfolio easier if you apply five criteria. They will steer you toward PIPs that have the greatest chance of succeeding.
- New profits should be achievable within 365 days. Longer time frames incur unpredictable risks. They not only defy ready calculation but invite disenchantment or cancellation of PIP projects already under way.
- New profits should be significant for both you and your customer. Shared profit improvement should not be confused with equal profit. The first objective—profitability for both—is a vital aspect of the concept of partnership. The second—equal profit—is both impossible and unnecessary.
- New profits must draw on a major product or service capability to be profitable for your company. Similarly, in order for your customer to profit, your proposals must affect a major product, service, or operation.
- New profits must be measurable in terms of a net increment or a decremental investment in operating assets. If it cannot be measured, or if no provision is made to quantify it, agreement on whether improvement even took place may be impossible to obtain.
- New profits should not be an isolated entity but a module that leads naturally to the next infusion of profits and then to the next one after that.
Box Two business managers are managers of cost centers or profit centers. Whatever operation their particular business function may perform or whatever markets their line of business may sell to, they are essentially in the business of asset management. They are funded by their Box One managers with assets in the form of cash or credit. They are expected to invest these assets in their operations to turn a profit on the original investment, which they will allocate to fixed and operating assets "under management." How good they are at this determines how much they will get the next time.
Consultative sellers can take on the role of contributing to their Box Two partner’s success as an asset manager in three ways:
- They can help their customer managers improve their ratio of selling successful proposals to Box One by adding high-quality investment opportunities to the managers’ portfolio and helping them to obtain more funds.
- They can help their customer managers improve their turnover rate of accepted proposals to Box One by adding more investment opportunities to the managers’ portfolio and helping them turn them over faster.
- They can help their customer managers improve their success ratio of implementing projects by adding expertise that will help earn more profits or earn them sooner and with greater certainty.
Consultative Selling is based on a universal management principle: Never add an asset to a customer operation without an asset management program to reduce its cost of ownership or to earn back more than its price.
For customer businesses in many industries, infinitesimally small problems can add up to significant costs. A leak of only 0.01 percent of oil passing through a refinery valve can add up to 1.2 barrels per hour, 28.8 barrels per day, and 10,512 barrels per year. At $10 a barrel, one leaking valve can cost $105,120 in lost annual sales.
If you sell leakproof valves, the $105,120 revenue gain per valve—multiplied by the total number of leaking valves in the refinery—is your product.
In a similar way, a $75,600 revenue gain per valve is your product if you can stop contamination from leaking into a 2,520 million gallon premium oil tank and downgrading it to regular oil that must be sold for $.03 less per gallon.
In business, money has one purpose: to make more money. To be a consultative seller, you must position yourself as adding the values of "more money faster and surer" to your customers. This is the supreme product. All customers need it all the time. There is always demand—no matter what you sell—because no matter how much money is on hand, there is always a short supply. There is never enough soon enough; "more money yesterday" is the only answer a Box Two manager ever gives to the question, "How much do you want and when do you want it?"
Every dollar that Box Two managers have is on loan to them. The loan, in the form of allocated funds from Box One, is callable on the date that the managers’ proposals have pledged to achieve payback on Box One manager’s investments. But that is only the beginning. Box One managers do not invest to achieve payback. Their objective is to maximize the return on their investment and to do so as quickly as possible. In this sense, the funds they lend to the Box Two managers who report to them are trust funds: Box One managers trust their Box Two managers to return the funds at a profit.
Positioning Profit Improvement
Positioning an improvement in customer profits is a three-step process: (1) definition of a customer problem to be solved or a customer opportunity to be capitalized; (2) prescription of the profit-improvement benefit from solving the problem or capitalizing on the opportunity; (3) and description of the operational and financial workings of the system that can yield the improved profit.
Step 1: Problem/Opportunity Definition
Your initial task is to establish consultant credibility. Initial credibility comes only from displaying knowledge of a customer’s business. Until a customer can say, "That supplier knows my business," the customer will rarely be inclined to say, "That supplier can improve my profit."
In fact, you must be knowledgeable about two areas of a customer’s business. First, you must know the location of significant cost centers that are susceptible to reduction. Second, you must know how a customer’s customers can be induced to buy more from the customer. In the first instance, you must prescribe a system that will reduce customer costs. This is a problem-solving system. In the second instance, you must prescribe a system that will increase customer sales. This is an opportunity-seizing system.
Defining a customer problem or opportunity has two parts: what you know and how you know it. The second part documents the first by citing the sources of your knowledge. It also reinforces your credibility. There are three likely sources of knowledge about a customer cost problem or sales opportunity. One is that the customer revealed it. This is the "horse’s mouth" source. A second source of knowledge is past experience with the customer, with other companies in the same industry, or your track record symbolized by its norms. The third is that knowledge can come from homework. This is the "midnight oil" source.
Step 2: Profit-Improvement Prescription
The objective of the first step in a consultative presentation is to say to a customer, in effect: "You have a situation that is detrimental to your profit. Either you are incurring unnecessary costs or you are failing to capture available sales revenues." The objective of the second step is to say, "Working together, we can reduce some of those costs or gain some of those sales as a cost-beneficial investment."
In this way, you further reinforce the perception of being knowledgeable about the customer’s business by framing the system’s benefit in businesslike terms of return on investment. By quantifying an added value the system can make to the customer’s operations, you are creating a business-manager-to-business-manager context for customer decision making in contrast to a vendor-to-purchaser context.
The prescription for customer profit improvement must specify the positive return that can predictably result from installation of your system. The return should be specified as both a percentage rate of improvement and its equivalent in dollars. These quantifications, the end-benefit specifications in money terms, rather than specifics about the system’s performance or components, are the ultimate specifications of the consultant’s system. These are what a customer will or will not buy. They are therefore what you must prescribe for delivery.
IBM consultants approach top-tier management of key retail customers on behalf of IBM’s computer-assisted checkout station. The consultants prescribe profit improvement benefits of reduced costs and increased sales like this: "For a store with gross weekly sales of $140,000, savings are projected at $7,650 a month by faster customer checkout and faster balancing of cash registers." The time required to check out an average order is said to be reduced by almost 30 percent. In addition, IBM sales representatives claim that the elimination of time and cost expenses of correcting checker errors can contribute annual savings of more than $91,000 per store.
If a store is growing, its total savings every year can approach one week’s gross sales at the $140,000 level. The net value of these savings falls directly to the store’s bottom line. The essential contribution made by IBM is providing added growth funds that supplement revenues from sales and can be invested for still further growth. In the course of making its contribution, IBM consultatively sells computers.
The same solution can often make a contribution to decreasing customers’ costs as well as increasing their revenues. In almost every case, the increased revenues exceed the cost savings. Revenues are also the reason customers are in business. So it is always preferable to sell the revenue gain rather than the cost reduction, unless the costs being reduced are costs of sale. In that event, a profit-centered line-of-business manager will be responsible for both.
The preeminence of revenues over cost savings does not mean you should not sell profit improvement through cost reduction. It means that you have two options, one of which is generally to be preferred.
If you sell simulation software that lets a manufacturing customer design new products on computer screens instead of by constructing physical prototypes, you can affect customer revenues and costs at the same time:
- You can affect revenues by helping the customer get new products to market faster, create products that are more reliable, longer lasting, and more energy-efficient, that are safer, that have better styling, and that are easier to customize.
- You can affect costs by reducing the number of physical models and tests, using fewer engineers and less design time, using less material, reducing repair costs under warranty and cutting down on recalls, paying for fewer design changes, lowering training costs, and reducing nonperformance penalties and late charges.
How do you decide which to sell?
Your decision must be based on comparative contribution:
What are the revenue gains from helping the customers get faster to market with a new model? How long do they take to pay back the investment and pay out the proposed improved profits?
How do the revenue gains compare to the costs saved by increased design productivity, with its labor and time savings?
How do the savings from design productivity plus savings from reduced warranty costs compare to the revenue gains in their muchness and soonness?
Does any combination of cost savings compare favorably with the proposed revenue gains?
In spite of the fact that cost reductions are typically less than revenue expansions, they can have five saving graces. First, costs are easier to quantify. Second, costs can often be reduced faster than revenues can accrue.
Because costs are internal, a third advantage can be the greater certainty of realizing a proposed saving than an added revenue stream. Fourth, once a cost is reduced or eliminated, it stays removed forever and can be credited year after year, indefinitely. And fifth, cost savings may be the most cost-effective strategy for mature customers in oligarchic markets where market shares can only be traded, not gained.
Step 3: System Specification
The third presentation step is to specify the system that will deliver the promised profit-improvement mix and to justify its premium price by interpreting price in terms of investment in the new mix. Customers must not be asked to buy systems; you must invite them to improve profit. They are not quoted a system’s price; you must promise them a positive return on the investment in their system.
The purpose of defining the system is not to sell it, but rather to present proof that the promised benefit is derived from known capabilities that have been prescribed precisely because they will contribute in the most cost-beneficial way to the customer’s profit improvement. The system substantiates your promise. Its capabilities, plus your personal expertise in applying them, are the means of conferring new profitability on the customer.
Defining a customer problem or opportunity should condition a customer to relate to you as a business manager. The next presentation step, prescribing a quantified benefit, should condition a customer to regard the system as a profit-making investment, not as a cost or a collection of components. Defining the system and justifying its price should condition a customer to credit the prescription as believable and achievable.
The final step in a system’s presentation is to set down the standards by which you progressively monitor the system’s ability to deliver the promised benefit in partnership with the customer. At least three control standards should be set so that a working partnership can be confirmed between consultant and customer:
- Time frames for the accomplishment of each installation and operational stage
- Checkpoints for measuring the impacts of phasing the system into customer business functions
- Periodic progress review and report sessions to head off problems and anticipate new applications and opportunities for system extension, upgrading, modernization, and replacement
The comparative analysis of customers’ costs to improve their profits by doing business with you and the benefits they can expect to receive are the heart of Consultative Selling. Cost-benefit analysis, which should really be called "investment-return analysis," positions profit projects as fundable or scrap. It tells customers how much they must lay out for how much they can get back. The basic format for costing the benefits of a profit improvement project with a five-year commercial life is shown in Cost-benefit work flow. Compare it with PIPWARE cost-benefit analysis, which shows a similar analysis of an investment’s costs and benefits in the software format of PIPWARE.
Glossary of cost-benefit guidelines is a glossary of guidelines to analyze the relationship between costs and the benefits that flow from them.
Investment
Represents customers’ total incremental expenditure to obtain our solution, including but over and above their costs to do business with us: capital equipment and materials, software, services other than annual maintenance, training, and other variable costs that will have to be expensed. It is assumed that the total investment is a one-time cost that will be paid out in full in Year 0. Total investment is the "cost" in the cost-benefit analysis.
Multiply the total investment in capital equipment by the current depreciation rate permitted by the accelerated cost recovery schedule (ACRS). Subtract the resulting cash flows generated by cumulative annual depreciation from the total investment.
Cash Flow
Represents the incremental cash benefits generated by the savings and revenues from our solution. They are calculated on a recurrent annual basis that can be accumulated at the end of the useful life of the total investment. Cash flow is the "benefits" in the cost-benefit analysis.
Payback
The cumulative cash flows to date have exactly returned the customers’ total investments so that they are released from risk and made whole again. After payback, cash flows become positive so that profits can occur.
Net Present Value (NPV)
Represents today’s current value of the sum of all the future cash flows after they have been discounted for annual opportunity loss based on what the same total investment might have saved or earned if invested elsewhere. Annual opportunity loss is calculated over the useful life of the total investment.
(The Year One net present value of $50,000 by the time it will be received in Year Two is $41,667, which represents $50,000 discounted by the factor of 0.83333.)
Internal Rate of Return (IRR)
The average annual percent return per dollar invested calculated in discounted dollars. If NPV = $60 at 10 percent cost of capital and if $60 = a rate of return of 8 percent, IRR = 18 percent, (8 percent + 10 percent cost of capital). Cost of capital is the customer’s hurdle rate.
Positioning Profit Projects
A PIP is a profit project. Its site is customers’ premises, either one of their business lines or a business function. A PIP is a money-making project. It says to the customers, "Here is where you are incurring unnecessary costs or missing out on realizable revenues. Here is what it is costing you. Here is how much you can save or earn. Here is what it will take to obtain the improvement and how long it will be before you can see it on your bottom line."
PIPs are designed to affect customers’ economies. To do this, they require adding the value of a supplier’s products or services along with information in the form of advisory services and training. Sometimes financing is involved as time payments or a lease. But the essential ingredient in every project is its manager.
Positioning a profit-improvement project is a consultative seller’s prime skill. This requires sellers to be good diagnosticians, making sure they have sized up the project correctly from the outset. The sellers must then be good prescribers in order to propose the most cost-effective solution for the problem or opportunity they have diagnosed. Then they must be good installers, implementers, and appliers to fit the solution seamlessly into customers’ operations so that it becomes a part of their natural flow. They must be good planners, exactly meeting each milestone along the way from startup through payback to realization of the proposal’s objective. And at every step of the way, they must be good partners with their customers’ people, without whose cooperation they can accomplish nothing.
Customers who are being PIPped must perceive that they are being invited to invest in the improvement of the contributions their operations make to their profits—not that they are being asked to buy the consultative seller’s products, services, or systems. They have no vested interest in the seller’s products. Their only interest is in the assets that they already own and how to improve their contributions.
A project in profit improvement begins when customers close the sellers’ proposal. The project ends not with the one-time delivery of products and services but with the on-time delivery of improved customer profits. In between, the sellers must manage the flow of work. Even more important, they must manage the flow of new profits.
The ability to diagnose heretofore unsolved customer problems in such a way that they can now be solved is an enviable asset for a project manager. So is the ability to conceive a simplistic solution that, for the first time, enables a customer problem or opportunity to be dealt with cost-effectively. But the greatest ability is dependability. Can the project manager be depended on to control the project, to keep it from getting out of hand, to pick up deviations quickly and remedy them at once, to avoid cost overruns, and to be free of surprises? If the answers are either no or, even worse, sometimes, no amount of creativity or simplistic problem solving can atone for the absence of reliability.
No two consultative sellers have the same intellectual capital or employ their capital in the same way. Given identical customer operations, customer objectives, and commodity products and services, one consultative seller will always propose what a customer regards as the single best solution—the most cost-effective way of solving a problem or realizing an opportunity. How can you become the proposer of the winning PIP and, consequently, the manager of the winning project?
The secret of Consultative Selling success is your personal ability to come up with an optimal mix of muchness, soonness, and sureness of benefits for each PIP. In other words, how much better than the next consultative seller is your intellectual capital when you apply it to bring together your technology smarts with your process smarts about a customer’s operations?
The value basis for Consultative Selling can be summed up in a single sentence: Consultative sellers are in the business of selling a dollar’s worth of value for 50 or 60 cents on the dollar.
This is more than any vendor can get for selling a dollar’s worth of cost.
Selling dollars is crucial because no one can make margin on products anymore. Yotaro Suzuki of the Japan Institute of Office Automation asks, "How do you assign prices in a world where quality is perfect?" Hiroshi Yamauchi of Nintendo concludes that "there is no way to charge a premium on hardware." In the United States, the most common assessment of suppliers by their customers is, "They make a great machine. So what?"
Positioning Product Businesses as Services
Consultative Selling transforms product businesses into financial service businesses by converting a product’s operating values into dollar values—and then selling the dollars, not the product.
Since the dollars are used to improve a customer’s profits, the supplier who practices Consultative Selling is providing a service. The name of the service is continuous business improvement of the customer. The role of the supplier’s products and processes is to enable the service to realize its objective.
In this way, a product-based business can segue into a service by reversing the rank order of importance of what it makes and how it sells what it makes. It sells as a service. It continues to make products as a manufacturer, but it makes its money on the service of counseling customers how to apply its products to improve their profits.
The business advisory role of a financial service provider allows consultative sellers to make their own products or to buy products from outsourced contract manufacturers. It also allows them to offer the products of other manufacturers with either their proprietary brand names or as no-name "white boxes." It makes no difference because, in any event, the products themselves are not sold. Only their contributions to customer profits are priced and proposed.
Service businesses propose profit improvement in the same manner as product businesses. The cost of providing their service, like the cost of products, is irrelevant as the basis for price as long as it is met. The capital equipment employed—human capital rather than hardware capital—is unique. But it still requires a customer to make an investment in its application, and the investment still requires a positive rate of return to make it compelling.
In examining a cost-benefit analysis, there should be no way to tell if its outcomes are being calculated for a product business, a service business that is being enabled by products, or a service business that is a pure play in which no products at all are involved. The only telltale sign in some cases might be a smaller investment on the cost-benefit’s top line and a consequently higher IRR as the result of lower or no hardware capital expenses.
The Consultative Selling service business model can take several forms. Electronic Data Systems (EDS) is a pure service play. It manufactures nothing. As an outsourcer of corporate information systems, EDS sells the results of its services in reducing its customers’ costs by getting IT off their books. EDS may also be able to generate revenue from an IT system by managing it more productively and renting out the excess capacity for gains that can be shared with customers.
IBM Global Services is also an outsourcer as well as an IT systems maintenance organization. Like EDS, it sells the value of the improved results it can realize for customers. Many of its own products are embedded in the systems it engineers, operates, and maintains. So are many competitive products such as computers, servers, and printers. IBM professes an ecumenical attitude. It makes its money on sharing in the value of the gains it creates, which are far greater than the margins on sales of hardware, software, or systems.
The decision to engage EDS or IBM is a financial decision. In order to make sense operationally to a customer, it must make or save dollars financially. No less than traditional financial services such as GE Capital or Citigroup, EDS and IBM Global Services represent themselves as sources of funds. If customers want their money, they will show them the costs and the benefits of their strategy for improving access to financial capital. It will come not from lending them new assets but from the service provided by making their current assets more competitive.
Product-based managers have often disparaged service businesses as dealing in intangibles. But the improved customer profits that a service business sells when it employs Consultative Selling strategies are no less tangible than the profits sold by a product manufacturer. They represent hard cash. They can be taken to the bank. They show up as earnings. In the end, profits are the ultimate tangible. From a customer’s point of view, their source is far less important than their amount, the speed with which they flow in, and their predictability.