How to sell expensive (or complex) products and services

[Listen to a seminar on this subject!]

If your organisation sells expensive (or complex) products and services, odds are, you get most of your new clients by ‘word of mouth’ or referral.

If you’ve tried your hand at lead generation advertising, you’ve probably discovered that, even if an advertisement does make the phone ring, it’s a pyrrhic victory. (Isn’t it true that traditional advertisements tend to attract a calibre of clients better suited to your competitor’s business than yours?)

The problem with ‘word of mouth’ as a primary promotional medium is that, because it’s passive in nature, it’s difficult to scale. In other words, ‘word of mouth’ is limiting your business to incremental (rather than exponential) growth.

So why is it that traditional marketing wisdom breaks down when products are expensive or complex – or, worse still, when products aren’t real products at all, but intangible ‘services’? And is it possible for an organisation that sells such products to develop a more proactive approach to business marketing than a reliance on ‘word of mouth’ business?

The answer to both of these questions lies in the discovery that there are actually two types of customer in this world!

Two types of customer

We like to say that there are two types of customer in the world.

One type of customer ‘buys’ a product. (She focuses primarily on product attributes and price.)

And the other type of customer ‘buys’ a relationship. (She is less focused on the transaction, and more interested in a longer-term relationship.)

A customer tends to be ‘product-focused’ when she’s purchasing a commodity. If she’s choosing between Qantas and Ansett, between Dell and Compaq or between Holden and Ford, she’s likely to make that decision based primarily upon product features and price.

However, if this same customer were choosing a new accounting firm, looking for a financial planner, or organising an African safari, she is more likely to be shopping for a relationship than for the very lowest price.

Now this observation is more than just a curiosity. The choice between product- and relationship-focused customers affects the very design of a business. The fact is, a business designed to serve product-focused customers will drive the relationship-focused variety away in droves! (And vise versa.)

A ‘product-centric’ business promotes features and price – where a ‘relationship-centric’ business promotes a total solution.

A product-centric business exploits the value in a transaction, where a relationship-centric business profits from the value in a relationship (lifetime value).

And a product-centric business grows primarily by expanding its share of market (more customers) – where a relationship-centric business grows primarily by expanding its share of customer (more services for each customer).

A natural advantage for small businesses

While small businesses do not generally have the scale required to compete on the basis of features and price, they do have a natural advantage when it comes to delivering ‘customer intimacy’ – a key requirement of relationship-focused customers.

Furthermore, relationship-focused customers are prepared to pay a premium for these relationships – insulating smaller businesses from the inevitable ‘margin shrinkage’ that efficient markets (read: their larger competitors) inflict upon them.

Smaller businesses tend to recognise this. But few have any idea how to attract, to service, or to profit from relationship-focused customers.

The solution is to turn traditional marketing methodology on its ear and build a relationship- rather than a product-centric marketing program.

Selling a relationship

If you’ve decided you’d rather be in the business of selling relationships than (keenly priced) products, here’s a three-step introduction to our ‘relationship-centric’ marketing model:

  1. Take your focus off sales. If your customers aren’t transaction-focused – you certainly shouldn’t be.
  2. Create an automated communications program. Because a key ingredient in any relationship is communication, this system should provide your customers with regular (and meaningful) points of contact with you. Your automated communications program should be designed to exploit the value resident in the relationships under your management. However, rather than designing this program to optimise the value of individual transactions, you should design it to maximise customers’ ‘lifetime value’. ‘Lifetime value’ is a measure of the gross profit earned over the life of a typical customer relationship.
  3. Identify potential customers and introduce them to your automated communications program. Rather than establishing a relationship with people after they make their first purchase (as is normally the case) you should establish a relationship in advance.

If your potential customers are those who will buy on the basis of a relationship, doesn’t it make sense to deliver this relationship in advance? (You’ll discover, in a moment, just how inexpensive it can be to introduce potential customers to your automated communications program.)

Building an automated communications program

Once you’ve decided to become relationship- rather than product-focused, your first step is to create an automated communications program.

Begin by building a central database, containing the details of existing customers, prospects (potential customers) and centres of influence. (If your database is a little cumbersome, it might be worth considering an off-the-shelf contact management application like Maximizer, Act or Goldmine.)

Your next step is to design a program of communications that will build and nurture relationships with the people on your database.

We suggest that a newsletter should be the backbone of your communications program. This is because a good newsletter is both effective and scalable. (It takes little more effort to send a newsletter to 20,000 subscribers than it does to mail 2,000.) A newsletter can either be a magazine-quality publication or, if your budget won’t stretch that far, it can be a simple two- or three-page letter, laser printed on your corporate stationery.

Either way, your newsletter should be designed to dispense valuable information to your subscribers (not to boast about your organisation). The best newsletters have a do-it-yourself feel. The great thing about sharing your knowledge with your subscribers is that it positions you as an expert in your field – and empowers them to work with you.

If you publish your newsletter quarterly – and this is our suggested frequency – it’s worth supplementing your newsletter with a monthly e-mail bulletin. While e-mail communication doesn’t have the same impact as print, its cost effectiveness makes it invaluable. For this reason, it is essential to capture e-mail addresses at every point of contact with subscribers.

Acquiring new relationships

The best-kept secret when it comes to relationship-focused customers is that you don’t have to wait for them to buy from you before you build a relationship with them. In fact, if you build a relationship with relationship-focused prospects before they need to transact, you are almost guaranteed their future business.

But how do you acquire these new relationships?

Well, if you sell to businesses, it could be easier than you think. You might just find that the names and contact details of your prospects are available from a list broker. For example, if your target prospect is a ‘human resources manager working in a company with 100 or more employees’, this list is available from all good list brokers. Simply buy the list and add the records to your database.

If your prospects need to be better targeted than this, it might be worth commissioning some telephone research to filter these records. For example, if you want to identify those human resources managers who operate a particular software application, it’s still cheaper to have someone ring and ask, than it is to try and build the same list using advertising!

If you cannot purchase (or otherwise acquire) a list of suitably targeted prospects, you may have to resort to less direct forms of ‘lead-generation’.

Now, because you’re looking for relationship-focused prospects, the trick with lead-generation is to promote a relationship – rather than your product or service. The obvious way to do this is to offer prospects a free 12-month subscription to your newsletter. Remembering that your newsletter has been designed to be truly valuable to prospects – this is an offer that’s likely to be eagerly accepted. (About 100 people a month request free 12-month subscriptions to AdVerb via our Website.)

We recommend the following promotional mediums for your relationship-acquisition campaign (listed in typical order of effectiveness):

  • Strategic alliances. Your prospects are already other businesses’ clients. Identify businesses that serve your prospects, and convince them to offer a free 12-month subscription to your newsletter to their clients.
  • Direct mail. If the lists that you can obtain from your list broker are not qualified enough to warrant the cost of telephone research, you can identify qualified prospects by offering a newsletter subscription to this list. Respondents are likely to have both an interest in your services, and a bias towards relationships.
  • Advertising. A successful lead generation advertisement is little more than a good direct mail letter, reformatted for the media in which you’re advertising. Of course, your offer is still a free 12-month subscription to your newsletter.

A recipe for growth

The turning point in the development of any business is the creation of a turn-key marketing program. If you sell expensive (or complex) products and services, our Relationship-centric Marketing Model is such a program.

Once you have recognised that your ideal customers are those who are in the market for relationships (rather than low-margin commodities), the battle is half won.

Now you can take your focus off transactions and apply it to building and nurturing relationships with a growing army of customers who are prepared to pay a premium to work exclusively with you.

It’s easy, once you recognise that there are actually two types of customer in the world!