In the services industry, the watchword is to listen to the customer. Providers tend to believe what their salespeople say about what the customer wants. However, salespeople really don’t understand the voice of the customer.
As evidence, think of what the salespeople relate back to management about an RFP. Things like “We lost on price” or “We don’t have enough credentials in this area” or “Our competitor has better credentials in this area.” Yes, that feedback comes out of the RFP process, but it’s given to the salespeople by the buyer’s procurement department. So salespeople report what they were told are the issues and mistakenly believe are what the customer wants when, in fact, it’s what the procurement department defines.
The problem is procurement departments seek to create a level playing field and commoditize the services providers offer. If you’re a service provider, you need to recognize that the procurement department’s goal is to get to a point where the requirements and capabilities are all equal and they can press you on price. That is the key to procurement’s psychology, and that is what you hear coming through your sales channel.
In effect, if you listen to the voice of procurement louder than the voice of the end users, you will hear the demand to commoditize and reduce price. That should be the very last thing you want in your offerings. What you want is greater value, greater differentiation from your competitors and the ability to command a premium for that greater value. But your salesforce will lead you directly away from this because they speak with the voice of procurement instead of the end users. They provide you wrong information that will drive you to less-differentiated offerings, lower pricing and less value.
In today’s market, value is created from understanding the business needs of the end user or the business user, not the bidding needs of the procurement department. If you’re listening to your sales team, you’re most likely listening to the wrong people regarding business users’ needs.
At Everest Group, we have observed service providers making this mistake made time and time again. It sets up undifferentiated, commoditized offerings and a race to the bottom.
Before you run harder down this path, you may want to take a step back and ask how you capture end users’ requirements and develop your offerings to meet their needs. That will lead you to differentiation in your offering, greater value creation and, hopefully, more pricing power and better margins.