Tuesday, June 25, 2013

Don't Overlook the Consequences of Client Problems

When selling your firm's services, keep this principle in mind: The depth of the problem defines the value of the solution. In other words, the more painful, costly, complex, or debilitating the problem, the more the client is willing to pay for the solution your firm offers.

Years ago, I was introduced to the idea that the value of a service is largely defined by whether the client or the service provider is driving the value proposition. When the client clearly understands the problem and can prescribe the needed solution, your service is less valuable. But when the problem is complex and the right solution is more difficult for the client to determine, the value of your firm's insights increases.

So one of the keys to differentiating your services and increasing your profits is doing an effective job helping clients diagnose their problems. Unfortunately, A/E firms often work in the opposite direction, taking a multifaceted problem (from the client's perspective) and reducing it to little more than a technical problem. What this means is that we become perceived less as problem solvers and more as specialized service providers. Which do you think is more valuable?

One way to increase the value of your solution is to connect it to solving not only the technical problem, but the consequences it produces. Imagine a scenario where the largest employer in a small town changes its wastewater pretreatment system, leading to periodic violations of the town's wastewater treatment plant permit limits. As an engineer, you can quickly diagnose the technical problem. But the real problem is much more complex, isn't it?
  • The business changed its pretreatment system because of excessive costs and operational problems.
  • Given the business's substantial contribution to the local economy, the Town has limited political capital for pushing it fix the problem. Plus there is already tension between the two parties over other issues.
  • The State DEQ is holding up approval of an amendment to the Town's NPDES permit allowing for land disposal of sludge pending resolution of the pretreatment problem.
  • With the delay, the farm owners who had agreed to accept the land disposal are getting antsy because of growing concerns by neighbors about the practice.
  • The mayor, who is up for reelection, has strong ties to the business in question, but also is facing pressure from citizens who use the river for recreation downstream of the treatment plant.
I could go on with the complications associated with this scenario, but you get the idea. There are many consequences arising from the pretreatment system changes, and most of them aren't technical in nature. Which engineering firm will be able to connect the dots and offer a comprehensive, value-added solution?

One did. They devised a solution that involved modifications to both the pretreatment system and the Town's facility, and at a cost that both parties could swallow. They negotiated with DEQ to gain approval for this novel approach. And...they led a couple of meetings with concerned local residents to explain the solution and, as a bonus, allay fears about the plan for land disposal. And...you probably guessed it, the mayor was prominently involved in the dialogue.  

This sequence all started when the engineering firm helped the client better understand the far-reaching consequences of the technical problem, how they were connected, and how a solution could be developed that addressed most if not all of them. For this, the Town was willing to pay them significantly more than any of the competing firms proposed.

In the classic sales book, SPIN Selling, author Neil Rackham describes how the best sellers in his extensive research went beyond simply characterizing the buyer's problem to helping the buyer understand the implications of the problem. This more accurately defines the true value proposition—one shaped by the seller, by the way—and enlarges the need for and the value of the solution. You might illustrate the initial value proposition this way:
This is often how the client perceives the situation, or at least defines it relative to procuring services from a firm like yours. But once you've helped the client develop a deeper understanding of the problem and its various consequences and risks, you are in a better position to redefine a broader, more valuable solution than the client initially envisioned, as depicted below:
Of course, there are other factors, such as budget limitations or long-entrenched buying habits, that may prevent a client from agreeing to your enhanced solution. But over the long run, uncovering and addressing the consequences of client problems will add value to what you do and help you combat the commoditization trend.

In exploring the client's deeper needs, you may find it helpful to use what I call the "Question Progression." Another finding of Rackham's research is that a certain sequence of questioning works best in developing your expanded value proposition. The Question Progression is my modified approach, which you can read about here.

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