In recent years, there has been a marked increase in the buying of professional services by management. This is true for a broad range of advisory activities, such as financial, economic, public relations, advertising, legal, personnel, research, and many others. By the same token, there has been a marked growth in the firms selling these services.
While companies pay hefty fees to this growing body of professional consultants and advisers, the amount paid out for fees is quite small if compared to the dollars at stake when companies follow the advice of professional consultants. Yet management has far less experience in buying professional services than it has in buying goods and equipment. Unfortunately, the tried and true rules for buying goods do not work when applied to the buying of professional services. Many a management has gone badly astray by applying the same rules that have served well over the years in building a plant or investing in capital equipment to the hiring of professional consultation.
This makes all the more important a better understanding of the buying and selling of professional services, especially of how this particular buying and selling differs from the buying and selling of more tangible goods. Having sat on both sides of the desk—both as a buyer and a seller of professional services—I believe that both parties are confronted with important differences from the purchase and sale of tangible commodities. As a result, I believe that a different set of buying and selling concepts is necessary. I would like to treat these differences, and then discuss the concepts which I believe management can use to handle them. Then, using a variety of case examples, I hope to show how the concepts can be practically applied by seller and buyer alike.
Services vs. Products
There are a number of key differences between the buying and selling of a tangible good and that of a professional advisory service. Perhaps the most obvious of these is that with a tangible good you have the actual product to evaluate, not just the person to whom you are talking. There is a mystique involved in evaluating a service that does not apply in buying a typical product. Also, in negotiating the purchase of a service the buyer often feels as though he is putting his fate in the seller’s hands.
In addition, whereas buying a good usually involves choosing from a finite number of alternatives within a well-defined category, purchasing a service is often critically dependent on which category of service is chosen. For example, should a company that feels its image is becoming “old-fashioned” hire a public relations firm to spruce up the image, a designer to modify the company logo, or a research firm to do a survey to find out why it is seen as old-fashioned, or what?
The above should suffice to make the basic point—goods are not the same as services, and the buying and selling of goods is not the same as the buying and selling of professional services. These differences in turn call for the use of evaluation and sales concepts different from those usually employed in the case of products.
Three Key Concepts
What then should a buyer or seller of services keep in mind? I believe the answer to this question lies in three basic concepts:
1. Minimizing uncertainty—A professional service must make a direct contribution to the reduction of the uncertainties involved in managing a business. The proper assessment of a service, unlike tangible goods, usually must take into account the impact of its performance on the client’s business.
2. Understanding problems—A professional service must come directly to grips with a fundamental problem of the business purchasing that service. The successful performance of the service, far more so than the successful production of a product, depends on an understanding of the client’s business.
3. Buying the professional—A professional service can only be purchased meaningfully from someone who is capable of rendering the service. Selling ability and personality by themselves are meaningless.
Let us explore each of these concepts further before proceeding to the practical consequences for buying and selling that emerge from them.
Sources of uncertainty
In the most general and fundamental sense, what the professional service organization really has to offer to corporate clients is the reduction or minimization of uncertainty. Other terms may be used: confidence, peace of mind, increased certainty, and so forth. Regardless of the terminology, the fact is that independent of the services offered the professional service organization holds out the promise of introducing more certainty in a particular area in which the client feels uncertain.
The feeling of uncertainty will not necessarily be overtly articulated by very many clients. But it is there. Three kinds of uncertainty can be distinguished:
1. There is the basic uncertainty of knowing with whom to deal and on whom to rely. In other words, the client who is interested in getting some assistance via a professional service is faced with the problem of where to get it. He has a number of alternatives open to him.
2. Because of the large sums of money involved in the purchase of the services themselves, there is uncertainty as to whether these monies are being wisely spent. I am referring to such expenditures as those for large-scale research undertakings, costly consultants, or commissions or fees paid for services. In most instances the amounts eventually at stake are still larger.
3. There is even more uncertainty in the problem itself. This problem is why the buyer of professional services is seeking advice or assistance in the first place. Whether the problem is in marketing, finance, personnel, research and development, or what, it is without question the single most important of the three sources of uncertainty.
Recognition of this particular concept of uncertainty, plus recognition of the three different sources of uncertainty, is the first step toward clearly defining the considerations that should apply to the sale and purchase of a professional service.
Persuasion or problem
The second concept refers essentially to the point of departure in determining the ability of the professional service firm to deal with a problem. In any such situation, there are two possible approaches:
1. The extrinsic—This approach is used when the service organization has only minimal understanding of the client’s problem, and its primary emphasis is on extolling its own problem-solving abilities via such devices as: describing a generalized approach to most problems (“persuasion by method”); describing the abilities, experience, etc., of key personnel in the firm (“persuasion by personnel”); or describing specific problems solved for other clients (“persuasion by success story”).
2. The intrinsic—This approach is applicable when the primary emphasis of the service organization is on coming to grips with a problem of interest and importance to the client, which it shows, for example, by indicating a grasp of the problem in sufficient magnitude to generate both confidence and interest in further discussion, then taking a tentative “pass” at the problem with further discussions and/or memoranda, which reinforces the initial confidence. Presumably, this promise would later be fulfilled by actually conducting a project (in terms of specific information, recommendations, action programs, etc.) in such a manner as to fully justify the initial confidence.
Unfortunately, the extrinsic approach is all too often the way that professional services are sold and bought. At the same time, the value of the outstanding service organizations rests on those situations where their services have been purchased on intrinsic considerations.
The true professional
The third concept involved in the purchase of professional services refers to the professional’s perception of himself and how this self-perception is manifested in dealing with the buyer. There are two basic approaches:
1. The professional salesman—This person thinks of himself first as a salesman; he sees his primary role as that of selling; and he sees his major personal strength as that of “being able to sell.” It is important to recognize that he may have professional credentials of varying degrees of quality, but he personally does not see these qualifications as his major strength; he typically does not bring them to bear on problems of a substantive nature but relies on others for this. He can and does sell energetically and aggressively on extrinsic considerations, but he copes with an opportunity to sell on an intrinsic basis by a process of formula thinking, dependence on others whom he identifies as experts, or both.
2. The professional who can also sell—This person thinks of himself first and foremost as a professional. His intellectual interests and his emotional gratifications derive from coming to grips with substantive problems. In short, he can do the work. However, at the same time, he is cognizant of those situations where he may be asked to demonstrate his and his firm’s capabilities to a client. He is not averse to becoming involved in said situations. As a matter of fact, he enjoys doing this.
The service firms represented by true professionals (i.e., those who can do the work) are far more valuable to their clients than those represented by professional salesmen.
Having discussed generally these key elements of the buying-selling aspects of professional services, let us now turn to a more specific analysis of how they apply in the practical world of decision making about such services. Translated into specific objectives for both the purchaser and the supplier of services, these elements become the tasks of:
1. Identifying uncertainty.
2. Confronting concrete problems.
3. Identifying true professionals.
Obviously, these three goals are interrelated. The accomplishment of any one greatly aids in the accomplishment of the others. However, we can examine each objective by itself, recognizing that the successful buyer, and seller, of professional services will keep them all in mind.
We have discussed above three kinds of uncertainty. Briefly, these are uncertainty as to the service organization’s distinctive capabilities, uncertainty about the soundness of the expenditure for the service firm’s work, and uncertainty as to the specific nature of the client problem being treated.
Which service firm?
The first source of uncertainty can be expressed in the form of a very basic question. The purchaser very rightly asks himself: How are these people any different from anybody else in this field? This question is always there, and it is the first thing that a seller of professional services must answer to the satisfaction of the prospective buyer.
Let us take a familiar example to illustrate this kind of uncertainty:
The millions of dollars involved in advertising expenditures lead, sooner or later, to a natural desire on the part of a company to learn more about whether its money is being well spent. However, to resolve this question requires the introduction of another: “Who is going to tell us if we are getting our money’s worth?”
The natural inclination is to ask the advertising agency to demonstrate the effectiveness of its efforts. But it is rather unfair to require the advertising agency people to be both judge and jury of their own case. No matter how objective they might try to be, their self-interest is so compelling that bias—however natural and understandable—always lurks in the background.
If the agency is ruled out, however, then who is to evaluate the effectiveness of the expenditure? Should a consultant be called? If so, which consultant? Should use be made of one or more of the syndicated services? If so, which one? Should the client organization design a study itself and then buy the parts (e.g., interviews, computer time, etc.) to implement it? If so, what parts and from whom? Should a firm be called in to do the entire job? If so, what firm should it be? In short, of all the alternatives, what service organization can best provide what is being sought?
Money well spent?
Now let us look at the second source of uncertainty: namely, how sound is the expenditure on the service firm’s work? In this context, “sound” really concerns quality, since (as we shall see) relatively small differences in the amount of money being spent may be related to large differences in the nature of the job which the service firm is performing.
The chances are that when it comes time to put one’s money on the line, the purchaser will have achieved the necessary sense of confidence to feel assured that his money is being expended soundly. So this second kind of uncertainty usually is taken care of along with the first—but not always. On many occasions, the purchaser has a tendency to become apprehensive once the contract gets under way and funds are being expended. The professional service firm cannot assume that commitment to go ahead by itself implies full and continuing confidence. Quite frequently, continuing and concerted efforts are required to reassure clients that the money is in fact being well spent. The selling of a service and the rendering of a service can seldom be separated.
Any selling involved in a professional service has actually just begun when the contract is signed. All that has been sold up to that time is a promise. The major “sale” comes in delivering on that promise. Many disappointments and disillusionments have resulted because of the failure of the professional service organization to realize this simple fact.
The real problem?
As important as the first two sources of uncertainty are, the third source is the crucial one. In fact, success in reducing uncertainty is often critically dependent on the ability to recognize and identify the trueuncertainty.
This is not a tautology. Indeed, often a client who wishes to purchase a professional service senses that he has a problem, but is uncertain as to what the specific nature of his problem, really is. The responsibility of the service firm is to identify that problem and define it in meaningful terms.We find three basic situations in which this is required:
1. A prospective client has bits and pieces of a problem, but is not sure how best to fit them together. The service firm’s responsibility is to put them together into an integrated and comprehensive whole.
2. A prospective client occasionally may think he has one problem, but really has another. The task of the service firm then is “to get him off” the artificial problem and onto the real one.
3. Quite frequently, a prospective client thinks he has a problem, but in fact does not have at problem at all. The service firm’s responsibility in this situation is to recognize that fact and not waste time convincing him that he really needs the firm’s help.
A Case Example.
An actual experience will illustrate this basic principle of identifying and minimizing uncertainty. A prospective client went to a large and well-known Wall Street firm, after having received a merger proposal from an other corporation. The prospective client was very much interested in the merger proposal, and thought the Wall Street firm could help in two specific areas:
1. An independent and qualified evaluation as to the merits of the merger proposal.
2. Guidance through the actual merger negotiations, if the proposal was deemed to be proper.
This was the essence of the problem, as the client initially stated it. On the face of it, the major sources of uncertainty had been identified: Was the proposal a sound one, and if so, how could it best be implemented? Once these dimensions of the situation had been set forth, the client asked the Wall Street organization what its charges would be. And this is what happened:
When the estimated charges were stated, the client was frankly astounded. And he said so—“How can you possibly justify such a charge for what we have asked you to do? Really, we are merely, asking you, on the basis of your experience and knowledge, to tell us if this merger proposal is a good deal. If it is, then you can help us implement it. There can’t be that much to it. Certainly, not enough to justify such charges.”
This open challenge to his firm’s charges suggested to the partner representing the financial organization two things: (a) his firm’s services were being evaluated as goods are—without sufficient focus on the potential consequences of the services; (b) perhaps the client was not aware of other problems that might be attendant on the merger.
Accordingly, he explained in detail the nature of the services that would be provided, and at the same time paid close attention to the prospective client’s reactions. He pointed out that it was not simply an issue of saying (after some study), “Yes, this proposal is a good one,” and then helping the client go ahead with it. If the proposal was not sound, it would require reworking and renegotiation—all of which could entail considerable time and effort. This was one possible consequence of the undertaking which had to be taken into account. The prospective client acknowledged this, but without undue comment.
The partner went on to point out that whether or not the original proposal, or a subsequent modification, provided the basis for the merger negotiations, a variety of problems were bound to emerge during the course of these negotiations. A crucial consequence of the services being offered depended on the effectiveness of how each of these problems was dealt with. Again, the prospective client indicated general acknowledgment.
The partner then went on to illustrate some of the problems that might come up, and how they would be dealt with. Among these illustrations was one example which aroused the client’s interest. The partner pointed out that one of his firm’s services was to deal with any recalcitrant stockholders who might kick up their heels at the merger. If a stockholder was unhappy with the merger prospect, the firm would help the company by explaining to that stockholder exactly how and why the merger was a fair deal. In effect, it would sell the stockholder on the idea.
Although the client had not mentioned it, he did have considerable concern about how the company’s stockholders might react to the merger. As soon as the partner mentioned this aspect of his firm’s service, the client prospect revealed this concern. At this point he had become far more aware of the various consequences of the Wall Street firm’s services than he was at the outset. He also realized that the financial organization could, and would, minimize his uncertainty in that particular area. In fact, it was the recognition that one of the major consequences of this service would be to pave the way with the stockholders that took the Wall Street firm’s charges out of the limbo of “incredulous” and put them into the category of “fair and reasonable.”
It is because the real problem is so hard to uncover (by the buyer as well as by the seller) that selling professional services requires a facility that most run-of-the-mill salesmen possess in small degree only, but which the good professionals not only possess but have mastered—namely, the ability to listen. I don’t mean the ability to appear to be listening; I mean the ability to really listen—to hear not only the words being spoken but the thoughts and emotions that often lie behind these words. Only by listening can the salesman of professional services identify the problem—the crucial source of uncertainty—and then, only by responding appropriately can he indicate his ability to come to grips with the problem—to reduce the uncertainty.
The task of confronting concrete problems is one of the most difficult aspects of transacting the sale and purchase of professional services. This must be a two-way street.
Obviously, the best way to generate a fruitful interchange is when an opportunity is presented directly and spontaneously by the client. The client says, “We have a problem. Here it is. How do we solve it?” Unfortunately, this does not happen very often. The reason it does not do so stems from deeply ingrained habits on the part both of client companies as buyers and of service firms as sellers:
- On the one hand, we find far too many situations where the client flatly resists providing himself with an opportunity to buy on intrinsic considerations. Because buying goods is seldom differentiated from buying services, the rules that apply to the former are also applied to the latter. One of these rules is that “the burden of proof is on the salesman.” The service firm’s representative is required to demonstrate the relevance of his services to the organization’s problems, but without any intimate knowledge of what these problems are or ever might be.
- On the other hand, we find situations where the service firm’s representative is given an opportunity to confront a concrete problem, but—as all too many service representatives do—he regales the client with everything but comments addressed to the specific issues. Such a reaction on the representative’s part results not only in a lost opportunity for him, but extreme frustration and annoyance on the part of the prospective client.
Why is it in the best interests of the purchaser of a professional service to provide the supplier with an opportunity to address a specific problem? Because buying professional advisory services is in essence buying people. It is not dissimilar from hiring an employee. When a prospective employee is interviewed—particularly at the middle and upper management levels—every effort is usually made to inform him of the inner workings of the company. The burden of proof is not completely on him.
There is a good reason for giving such care to the hiring of a key executive. In the purchase of products, alternatives usually offer fractional advantages. Product A may be nine tenths as good as Product B. If A costs eight tenths as much as B, and performance tolerance is sufficient, then A is preferable. Comparable options are not open in the hiring of a key executive. Even at a lower price, nine tenths as good as the best is like swimming nine tenths of the way across the English Channel. The principles that ought to apply to the purchase of a personal service are those that apply to the hiring of a person; they are not the principles that apply to the purchase of a good.
In short, while prevailing practices all too often avoid purchasing on intrinsic considerations, it is very much in the self-interest of the purchaser to buy precisely on such grounds.
Selling the seller
Even when the client does “tell” in terms of concrete problems, but particularly when he doesn’t, the professional service representative often tries to sell on the extrinsic grounds we have criticized earlier. Let us examine each of the three major techniques of selling on extrinsic considerations.
Persuasion by Method.
Because of the confusion between goods and services, the persuasion by method tends to be perpetuated and belabored. What is sold are the characteristics of the service rather than its consequences. In marketing research, for example, the practice couldn’t be clearer or more lamentable. Both buyers and sellers tend to stress how the data are obtained rather than how the data can be used. Techniques (e.g., group interviews, individual depth interviews, eye cameras, probability sampling, etc.) get the emphasis. In short, the great bulk of marketing research gets bought “by the pound.”
The fact of the matter is that business problems should come first and methods of solving them should come second. Unfortunately, current practice bends it the other way around: the firm selling a technique invariably twists the problem to fit the technique. However, with those individuals who stress flexibility of methodological approach, rather than fixation upon methodological approach, discussion of method can and does provide a basis for coming to grips with a substantive problem. If it is made clear that any method that might be used is dependent on what the problem is, then some problem has to be stated for the purchaser to have a realistic basis on which to assess what is being sold.
Persuasion by Personnel.
I made the point above that buying a personal service was akin to hiring an executive. While this is true, the analogy unfortunately leads to a second selling practice that tends to be unnecessarily perpetuated and belabored.
Reputation of key personnel is without any doubt a major asset of any professional service firm. There is no reason why such assets should not be capitalized on. Even more important, there is every reason why they should be investigated. Prospective clients are well advised to ask about people working for the service organization, and specifically about who will be working on their particular account or assignment.
However, there is a limit to what can be done with the information, particularly if it is the only basis for the selling proposition. The client is in effect being asked to buy on faith, rather than on a clear understanding of how a solid reputation can and will be translated into specific benefits for him. This is particularly difficult when he is not talking to the particular people with whose reputations he is supposed to be impressed.
Once again, there are those few instances where “persuasion by personnel” makes some sense and has some utility. Almost without exception, those instances occur when the representative of the service firm is capable of demonstrating his own competence commensurate with the competence of the personnel he is promoting.
Persuasion by Success Story.
Of all the extrinsic considerations, the persuasion by success story makes the most sense. Unfortunately, when it does get used, it tends to be used with a heavy, hand. “We are the biggest firm in the business.” “Our clients include…” “Our services for the XYZ Company resulted in profit increase of 20%.” These are the kind of baldly stated success stories which get bruited about all too frequently.
On the other hand, the success story through analogy is appropriate. What I mean here is the illustration of relevant problems dealt with in the past without divulging client confidences or identification.
In the presentation of such examples, there should be an avoidance of overemphasis on the success aspect of the story. Rather, the emphasis should be placed on the substantive nature of the problem. Via such a technique two things can be accomplished: (a) it enables the buyer to assess the service firm’s capabilities in recognizing the unique aspects of a given situation; (b) it also permits evaluation of the firm’s capabilities in coming to grips with the essence of that situation. I use the word analogy because the most crucial thing that should be accomplished is to provide the buyer with some basis for identifying himself with the situation being described, i.e., provide him with a point of contact with what is being talked about and what he has on his mind.
To illustrate, in our own firm’s preliminary discussions with prospective clients, we have found that a simple straightforward recounting of some of our work in the areas of new product development, basic market planning, and communications research almost invariably provides a basis for discussion of concrete problems of direct interest to the client. There are few service firms without interest in at least one of these three areas.
Coming to grips
To put this principle of coming to grips with a substantive problem into proper relief, let us take a look at what actually happened when one segment of the meat industry presented an opportunity to a number of firms, only one of which recognized the opportunity and acted accordingly:
Per capita consumption of one kind of meat was far below that for competing meats despite a large-scale advertising and promotion campaign carried out over a number of years. Obviously concerned, the meat industry involved decided to embark on a research program to uncover the reasons why people were not eating as much of this meat as they did of other meats.
A basic research plan was developed, and then a number of marketing and communications research organizations were invited to submit bids on the implementation of this plan. The plan involved an experimental design which tested the sales success of different advertising and promotion conditions. In addition to measurements conducted at point of sale, a certain amount of consumer interviewing was tied in to the study. As research budgets go, the magnitude of cost required to carry out this plan was considerable. Hence, to the competing firms, the job was an attractive one.
However, only one of the firms fully recognized the opportunity. While the other organizations extolled their qualifications to implement the experimental design study plan, this firm tactfully and judiciously pointed out why the experimental design plan was less preferable than an alternative approach to the problem.
While the experimental plan was entirely satisfactory in terms of its actual design, implementation of the plan posed problems. This was true from the standpoint both of obtaining store cooperation and of controlling all the variables that had to be managed within that cooperation. A strong probability existed that the elegance of the experimental design might be vitiated in its real-world execution.
Furthermore, while the contemplated plan would definitely shed light on the issue of per capita consumption, it did not come directly to grips with the client’s problem: consumer resistance to eating more of his product. Again, recognizing and seizing the opportunity to have the prospective client’s purchase decision based on intrinsic considerations, the firm in question showed how its own recommended alternative plan would address itself directly to the problem.
This firm received the assignment.
In this situation, the client’s uncertainty—even anxiety—was manifest. It couldn’t have been more clear, or more solidly grounded. People just weren’t eating enough of his product. But when the sales opportunity was presented to a number of firms to help alleviate that uncertainty, only the firm which combined the hard work of thinking through the problem substantively with the courage to recommend something other than what the client thought was required to solve the problem—only this firm properly capitalized on that sales opportunity.
The accomplishment of the third and final goal is to a very large degree contingent on the first two goals. If success has been achieved in reducing the areas of uncertainty and if there has been success in coming to grips with a substantive problem, then the service firm’s representative has by definition established his role as that of the professional.
On the other hand, this is not as easy as it sounds, for the true professional is characterized by two critically important things:
1. Demonstrable knowledge and skill in his particular area of avowed competence.
2. Recognition of the limits of his knowledge and skill—the ability to see clearly the borders of his competence.
In very real and very practical terms, I cannot stress too strongly the importance of both of these characteristics. It is amazing how many professional service firm representatives fail to recognize that one very important way of generating client confidence is via the willingness to state firmly that a particular problem is beyond one’s ken—if this is the case—or that aspects of a problem are puzzling, unfamiliar, or require further thought; in short, the willingness to say, “I don’t know,” when that is the truth.
By the same token, responding to virtually every question of a substantive nature with some response as, “I would have to refer to our statistical department for an answer to that one,” or busily making notes and then concluding with some such statement as, “I’d like to take this back to the shop and discuss it with my associates,” stamps one equally, if not more so, as a professional salesman and not a true professional.
Three Ph.D.’s represented their organization in a sales or client-contact capacity. For the purpose of our example, we will call them Dr. X, Dr. Y, and Dr. Z. While the academic backgrounds of the three differed slightly, all three, on the surface at least, and in the eyes of a prospective client, were qualified professionals.
Each one of the three faced a comparable sales situation, but handled it differently:
- Dr. X was called in to discuss a situation in which a variety of media allocation strategies were being employed in a number of different markets. The client wanted Dr. X to develop a plan which would evaluate and indicate the best of the different approaches.
In the course of the discussion with the client, Dr. X listened carefully and made copious notes—in this respect, certainly following one of the cardinal principles of selling professional services.
However, he also limited his own comments to inquiries about the size of the client’s budget, reassurances that his organization could do the job economically, laudatory references to certain other professionals in the firm whom he stated would direct the project if his firm received the assignment, everything but addressing himself directly to the problem that the client had presented.
At the time that he departed from the client’s office, the latter had virtually no idea how Dr. X and/or his firm was going to approach the problem. The client was left with the distinct feeling that in spite of Dr. X’s professional credentials, he was functioning purely as a salesman. His impression was that if somebody was going to give his problem any thought, it was not going to be Dr. X.
As the client had expected, Dr. X himself did not give the problem any thought. After the initial call, he turned that aspect of the situation over to someone else in his organization—Dr. Y.
- Dr. Y was a professional all right, but he never really gave himself the opportunity to prove it to the client. He just went merrily on his way and designed what seemed to him a very neat experimental plan for the client.
In designing the plan, Dr. Y used a statistically pure method of “randomization” for assigning each media strategy to the different geographic areas selected for testing. Dr. Y was completely faithful to his professional training, but he also was oblivious to the realities of the client situation.
The information had been passed on to him that the client had selected certain areas for certain strategies. The reasons behind these selections were not revealed. Dr. Y did not bother to inquire what these reasons were; he simply disregarded the selections and whatever logic might have been underlying them.
In short, by ignoring the decisions which the client had already made, Dr. Y implied that he knew everything—certainly more than the client did. If there had ever been a possibility of convincing the client that a true test of the different strategies required Dr. Y’s method of selection, that possibility was never fully taken advantage of.
- Dr. Z, in contrast, was called in by a client with a somewhat comparable problem. Again the client was interested in evaluating a number of alternative media strategies.
Dr. Z listened carefully. He also asked a number of very searching and penetrating questions. These questions revealed unique aspects of the problem as well as the bearing these aspects would have on any research approach which might be undertaken.
In the entire course of the conversation, Dr. Z said very little about the qualifications of his organization. Nor did he address himself to questions of budget; nor did he relate any impressive examples of previous success with similar problems; nor did he concern himself about much of anything except the client’s problem.
At the conclusion of the conversation, the client asked Dr. Z when he would receive a written proposal. “I don’t think I’m ready to write a proposal yet. I want to give your problem some more thought and then come back and discuss it with you again,” was Dr. Z’s answer. This frankly surprised the client because the other organizations being asked to submit plans had terminated their initial discussions with the assurance that they had all the information they needed to write a proposal.
The client also was intrigued. Dr. Z had asked questions nobody else had; he had probed the problem to a degree far beyond the others, and yet he in effect was still saying he didn’t know enough to write a proposal. In short, by his thorough and searching exploration of the problem, Dr. Z had established the premises for the purchase as intrinsic ones. By clearly demonstrating his professional skills, and by being willing to say, “I don’t know yet,” when he was asked what plan he would recommend, he further underscored his competence and integrity.
Dr. Z actually came back on two further occasions to discuss the problem with the client. By the conclusion of the third discussion, the research approach that Dr. Z wished to use had evolved and crystallized to the point where it was clearly understood by both parties—specifically what was going to be done, how it was going to be done, and how ‘it would come to grips with the problem.
Dr. Z did not write up a formal proposal. By the conclusion of the third meeting, there had been sufficient discussion and meeting of the minds, so that all he was required to do was draw up a brief contract stating what had been agreed on.
Highest bidder wins
Let us look at another case which illustrates how to buy—and sell—a professional service. In this instance, the price of the service became the least relevant client consideration because of effective service selling.
A company was interested in entering a new business. This particular business appeared to be a logical extension of the company’s existing product line. The product in question was in the general area of building products—particularly products which would be specified by architects and/or interior designers. It was these two groups that held the key to knowledge about the existing market as well as the probable future of this market over the next five to ten years.
To get into this business, it would be necessary either to purchase a company already manufacturing the product, or else to build a new plant to make the product. There were financial and management advantages and disadvantages to each alternative, and obviously the dollars involved in the decision were of some considerable magnitude. To assist it in making the decision, the company called in three professional service firms (let us call them R, S, and T), one of which it wished to choose ultimately for a study of the existing market.
Each of the three service firms was presented with the same description of the problem, the company’s objectives, and the sum of the existing knowledge about the market then in the hands of the prospective client. But, again, as in the previous example, there were three different responses:
The first firm to submit its proposal and bid did so almost immediately. It quoted a price of $16,500 for the job and placed considerable stress on the fact that the interviewing of the architects and designers would be done in its entirety by the principals of the firm—men who were presented as knowledgeable professionals.
The second firm to submit a proposal quoted a price of $20,000. However, it also took an additional week to prepare its proposal. The added time was evident in the proposal. Obviously, considerable time and effort had gone into its preparation. There was some moderate emphasis placed on how the information would be obtained, but the primary focus of the proposal was on a thorough consideration of the problem faced by the prospective client.
The contrast between the first and second proposals was marked. The additional $3,500 in price was more than accounted for by the obvious extra concern and thought. The introduction of intrinsic considerations on the part of the second service firm was the key to differentiating it from the first one, which had attempted to sell almost exclusively on extrinsic grounds.
The third firm, however, took a significant step beyond either of the first two. As a basis for preparing its proposal, it went out and talked to a number of architects and interior designers. Just this extra effort and investment on its part made it significantly more knowledgeable about the problem than either of its competitors. This greater degree of knowledgeability was manifest in its proposal. The price tag for the third firm was again higher—in this instance, $24,500. But the extra knowledgeability made it relatively easy to demonstrate why this particular amount of money was required to come properly to grips with the client’s problem.
The vice president of the client company who had originated the project had initially established a budget of $5,000 to get the information he was seeking. However, he experienced little difficulty in seeing both that his original assumptions about the cost of getting the information were badly off base, and that the firm with the highest price was obviously the one with whom he wanted to do business. In spite of the fact that this price was virtually five times what he thought he was going to have to spend at the outset, he did not require a higher degree in mathematics to relate a $24,500 outlay to his market objective of $10,000,000 in sales after five years.
In this article I have set forth three key concepts that are fundamental to buying and selling professional or advisory services.
The validity of these three concepts leads to three very simple, yet powerful and effective, rules for the purchaser of professional services. By the same token, these become major considerations for the seller of professional services.
First, it should be recognized that the ultimate goal of considering what a professional service organization has to offer is to bring about a degree of increased certainty for the client in an area where uncertainty is felt. If this objective is not held out as a goal, then whether the purchase of the service makes any sense at all should be questioned seriously. Sellers of services who recognize the need to identify and reduce uncertainty have taken a major step toward winning a client.
Second, when management is considering the purchase of a professional service, it should insist that the representative of any professional service firm be able to address himself directly to a substantive problem. Similarly, these representatives should seek information from prospective clients on what the latters’ substantive problems are. It makes little sense to dissipate precious management time listening to a lot of extrinsic selling when the acid test of the representative’s competence is the degree to which he can talk to the issues of relevance. The fact that there is no better test of his right to represent a professional service firm and to take up valuable management time means in turn that management should not be reluctant to present a concrete problem to the representative.
Third, management should insist on dealing directly with individuals of true professional competence. The professional salesman may be fine and dandy for tangible goods, but he has little or no place in the selling of professional services. He can only function as a middleman. Only by insisting that the people you are talking to can render a service to you as well as sell it, can you be assured that what you are buying will be of genuine value and use.
There are some few companies today that buy and use professional advisory services in a far different manner from the great majority of corporate clients. These companies recognize that in an era when the usual sources of competitive advantage (production, distribution, sales) have become blurred, skillful employment of professional or advisory services can constitute a major competitive edge. On this basis, such services can make a significant contribution to the way the business is run and its net results as they show up in the annual statement.
A version of this article appeared in the March 1966 issue of Harvard Business Review.