In a later content, we have presented a service provision quote tool, based on the break-even point calculation.
This method of quotation, based on internal variables of the company, allows the realization of viable budgets. However, it does not integrate an analysis of the external environment, a very important variable, if one wants to do good business when quoting a service provision.
This analysis of the external environment, and particularly of the competition and current and potential customers, will allow the company to better identify the perceived value, on the part of customers, of its offer.
In fact, there is a direct relationship between the customer's perception of value and what they are willing to pay for a certain product or service.
A) Analysis of the external environment of the company
Analysis of current and potential clients
The implementation of marketing tools for interaction (feed-back) with customers should allow answering the following points, about the company's customers:
What are the general benefits sought by customers regarding the service provided by the company?
How did current customers get to know the company? What are the advantages to working with the company? Do they find full satisfaction to your needs?
What are the most relevant aspects of my company's service for clients? What are the weak points?
Who are my potential clients? Why did they contract the offer of the competition or did they not contract any services yet?
Customer analysis aims to identify key success factors * in the company market. It allows you to have an idea on which basis the company's customers “value” the service provided.
- Example of key success factors: Speed of delivery, Respect for delivery times, Customer payment facilities, Price, Quality of work performed, Technology used….
Competitive analysis
The analysis of the competition consists of the knowledge of the offer of services of the competitors and their pricing policy, as well as the perception of value of the clients for said services.
The first stage of the investigation is to identify your competitors:
Who are my competitors?
"My competitors are those companies that seek to meet, with the same products / services, the needs and expectations of the same group of clients (direct competition) or another group of clients (indirect competition)."
Sources to get information about your competitors
Internet Most companies today have an Internet site and it is the first source to consider when looking for information.
Personal visits or calls to better identify how your competitors interact with potential customers.
Current and potential customers to know what they say about their competitors and your company too. (Although this stage seems difficult to implement, there are several marketing tools to carry it out.)
Advertising Analyze the communication of your competition to know more about their customer profile, their positioning, the characteristics and benefits of their service, prices,…
Events, fairs and exhibitions
Press
Once the information from the different sources has been obtained, a profile of the competitors is assembled with the following details:
1. Company data (company name, subscribed capital, address, partners, number of employees…)
2. Report on the company's products / services (name, characteristics, prices, payment terms, promotion, quality of service…)
3. Customer Profile.
4. Strategies and objectives of the company.
From the analysis of the external environment, a comparative matrix * of the company and its competitors can be assembled. This comparative matrix establishes a ranking of the companies concerned, based on a weighting of the key success factors. Each key success factor being weighted according to its relative importance in the customer's purchase decision.
However, more than giving a simple classification, the analysis of the external environment will provide several benefits to the company, since the results obtained will allow:
- Identify why current customers choose their company as a design service provider. Then, you will be able to better communicate these competitive advantages to potential clients. Implement improvements to your own company's offer and thus be more competitive. Highlight categories of clients whose needs are not well served. Learn more about the characteristics of your market and the keys of success. (For example, if a successful competitor uses payment conditions or rates that are very different from that of your company and that are well accepted by customers.) When making strategic decisions, you can see if the market is saturated with valuable competitors and thus save costly expenses in terms of more investment in the same market.
B) Application to the first contact interview with the client
When a customer buys a certain product or service, he seeks to solve a problem. This problem is based on the differential existing between an initial situation, with which the client is not satisfied, and a final (objective) situation, where the client found satisfaction to his
needs through the use of a solution (product or service).
To solve their problems, the client will look for information that allows them to identify the solutions, and can obtain them from various sources:
- Own experience Press Family members Collaborators of your company Observation of your own competence Contact with the solution provider and / or your competence
When making their purchase decision, the client evaluates each offer of services in terms of satisfaction of their needs and competitive advantages. In fact, it is these two variables that define the value perceived by the customer.
In the case of creative services, you always have to do a first contact interview with the client, and then present him with a quote.
During this first interview, the creative services vendor will have to exchange with the potential client to clarify the following points:
- The usefulness of the service for the potential client (What is the client's problem? Initial situation Final situation) The options presented to the client and of which he is aware (Did he receive an offer from the competition?) To what extent the buyer perceives the price itself as a measure or an indication of the value of the service (What is the budget affected by the client?)
The seller will know more about the degree of knowledge of the customer about the service and its benefits (eg, what are the benefits of an Internet site for a company, apart from being accessible from the whole world?), So what price is it? willing to pay for the acquisition of the service and, then, the resolution of their problems.
The seller may thus have an evaluation of the value perceived by the customer regarding the service.
We will agree to say that this value perceived by the client may be very different from the potential value of the service, that is, the value that this service could have, for this client, after having communicated its differential advantages.
Two situations can arise, after this first phase of interaction with the potential client:
- The value perceived by the client equals or exceeds the potential value of the service: that means that after a good handling of the sales process, the seller will be able to close the sale, justifying, without difficulties, his quote for services, and even increasing his margin of current profitability.
- The value perceived by the client is less than the potential value of the service, which means that the seller will have to implement Sales Techniques and Negotiations to justify their price of services (sell competitive advantages to increase the value perceived by the client) and close a more complex sales process * that is advertised.
C) Conclusions
- It must be understood that each client has different needs and attitudes and therefore - potentially - different prices. The service vendor's job is to clearly understand these needs, and thus be able to solve the client's problem with an adapted solution.
- There is no doubt that knowledge of the competitive advantages of the offer is an extremely important point for the sale of a service. This knowledge is obtained after the permanent analysis of the external environment of the company (Competition, current and potential customers).
- Do not forget: There is a direct relationship between the perception of value by the customer and what he is willing to pay for a certain product or service. Managing the value perceived by the customer ** becomes an important strategic axis in the case of service provision.
* The sales process and its management will be developed in more detail in a future content of the consultancy "How to sell services?"; In case of interest, write to info @ good- consulting.com with the subject concerned.
** A next content on "How to manage the value perceived by the customer?" It will also be available, in case of interest, write to [email protected] with the subject concerned.
