Understanding Client Risk: The Key To Winning More Business

When Tom McMakin and I were doing the research for our recently published book, How Clients Book, I recall something from an interview with Walt Shill.  Walt is the Global Commercial Director for the environmental consulting firm, ERM.  Walt has spent most of his successful career in management consulting….at reputable places like McKinsey, Accenture…. and now ERM.  Walt’s wisdom is sprinkled throughout the pages of our book.  

Walt offered this perspective:

“And I think the thing that I always underestimated that I now value the most is that in many cases if you hire a consultant, it’s a career risk and the bigger the prize, the bigger the risk. And well, I think I knew it, but did not realize early on how important it was.” 

Then, more recently, I was having coffee with Dave Bayless.  Dave is a much sought after business advisor and co-founder of Human Scale Business (www.humanscalebusiness.org).  Over coffee, Dave laid out for me a model he was working on related to cultivating trust and understanding.  Dave offered me – as Walt had nearly two years ago – the insight of the risks a client faces in hiring a consultant or professional service provider.  Dave talked about the topics of competence risk and integrity risk.  Walt’s and Dave’s words collided in my head and began to ferment.  And, I began to connect their insights to the topic of why its much harder to sell a service than a product.

Let me back up for one moment, and then I’ll try to connect the dots.  Tom and I lay out in Chapter 3 of How Clients Buy the difference between selling a tangible product vs. a credence good (e.g. consulting, law, architecture, etc.).  Credence is derived from the Latin word, credere, meaning to trust or believe.  We propose in our book that product decisions are based upon tangible things like specs, attributes, features, warranty, etc.  Think about the last time you bought a smart phone or laptop.  It was probably based upon things like pixels, size, weight, gigabytes, product reviews and warranty.  And, most importantly, you could walk into the Apple store and hold it in your hand.  The leap of faith in buying this product was relatively small.  Even for large purchases, say a piece of MRI equipment or an enterprise software solution, the risk is reduced by the fact that we can test drive the product before actually purchasing it.

Now, think about the last time you hired a professional service provider.  A financial advisor, web developer, or physical therapist.  You probably made the purchase much differently than you did for your iPhone.  You based your decision on the person’s reputation, credibility, respect, trust, your relationship with the person or the referral from a trusted friend or colleague.  The leap of faith is larger – because we can’t easily test drive a service.  Buying a service is woven with many layers of risk – or uncertainty – making the purchase scarier.

Risks are one of the key drivers in why selling our services is so much harder than selling a product.  Here are just a few of the risks:

  • Competence risk: Are we really good at what we do?
  • Culture risk: Are we a good fit culturally? Do we share similar values?
  • Performance risk: Will we actually follow through on doing what we say we will?
  • Team risk: What if our key team members leave the project before it is accomplished?
  • Integrity risk: Will our motives be pure? Will we do what’s best for the client at all times?
  • Reputational risk: How will this hurt my firm’s reputation if the project ends poorly?
  • Financial Risk: How badly will this impact our firm’s financial performance if things don’t go well?
  • Career risk: Will my career be derailed if this project goes badly? Will I be blamed for this?

Risks and uncertainty are at the center of why selling our services is very hard.  Especially the first time we work with a new client.

The main reason Tom and I wrote How Clients Buy was to help all of us better understand the client’s buying decision journey.  Our belief was that if we better understood the client’s journey, we could participate in this journey and ultimately become more successful at serving our clients.  Much more work needs to be done in better understanding this notion of client risk.  In understanding the risks a client takes in choosing to hire us, the more successful we can become in mitigating these risks in ways that make the leap of faith smaller when choosing to work with us.

We’ll save for another rainy day the discussion of how we can mitigate these risks – and improve our success rate at winning new client business.  Have a good weekend and I hope this gives you something to think about while you’re watching your kid’s soccer game.

 

 

2018-11-16T19:03:21+00:00

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