This article was published in the November 2021 edition of the MassCPAs publication SumNews.

I hear it all the time...Professional services firms don’t think of themselves as commodities, yet their prospects seem to think they are. That can be really frustrating, especially when you’re putting a lot of effort into getting to know the prospect’s business, creating customized proposals and offering unique service packages. Here’s the thing. In these cases, your prospect has already decided the service you offer is a commodity, and they’re likely going to make their decision based on price. From their perspective, there are fifty firms in the proverbial phonebook, and they all essentially seem the same. What if, instead of trying to convince the commodity buyer that in fact your firm provides bespoke, highly valuable services, you instead found a way to give them exactly what they’re asking for - in a way that makes you both happy? Here’s what to do to serve commodity buyers without wasting time on proposals, losing money on discount services, or negatively impacting your reputation.

Commodity or Value?

First, you have to decide if your firm will exclusively offer commodity services, value based services or both. Be realistic about what you do well, your brand and where you see opportunities.

• Commodity service provider- There are benefits to working with commodity buyers if you have a plan. Creating service packages that clearly state what is offered and the cost are a great tool for selling commodity buyers. Just know that in order to keep your price competitive you’ll have to be selective about what is included in your packages - and stick to it!  
• Value based service provider- If you’re only offering value based services, be prepared to quickly identify commodity buyers and take a pass. Make sure you can confidently articulate the value you provide, your niche, and go to market that way.
• Both - It is possible to do both, but only go that way if you can do both well. That means not discounting your value based services, or extending beyond the terms of the engagement with commodity services. It’s easy to blur the lines since your firm technically does both of these things.

Commodity Pricing

If you’re going to serve a commodity buyer, make sure you can make the costs work. It’s easy to start chipping away at the number to make it seem attractive, but you still have to make a profit. Think about how you can streamline your offerings without sacrificing quality. Here are a few examples: Offering a set number of meetings or no meetings, holding remote meetings instead of in-person meetings, using technology to put more of the grunt work onto the client (such as uploading documents into a portal vs. delivering paper), requiring that the client provides all documents before a certain date for timely tax return completion, limiting the number of rounds of revisions of a document, increasing the guaranteed  turnaround time for communications to two days if your typical is one day, requiring upfront or automated payments, and assigning those buyers to an associate rather than a partner.

Avoid the Traps of Commodity Offerings

Serving commodity buyers can simplify your sales process in many ways, but it can quickly turn into doing too much for too little money. It’s critical to train your team on providing commodity services. Make sure they understand what is included and not to provide any work or services outside of those bounds unless the customer wants to upgrade their package. To that end, once you find your price and package, set it. There are no further discounts or stripping away of services. I can’t say it enough--Be vigilant about scope creep.  When you work with value customers, you might do extra. Commodity buyers will also ask for things they’re not paying for.  You (and your team) will need to be ready to essentially say, “That service isn’t included in the package you chose.  If you’d like to upgrade, I’d be happy to walk through that with you.”

Find the Floor

Even though you’re offering a competitively priced package, there has to be a limit to how low you can go. There is a bit of a balancing act required here. Even though you’re helping your clients save money, you still have to provide quality service. Commodity buyers will still share their experience with others, just like any other client. Don’t forget, the firm still has to make money from commodity buyers. Determine your costs, and then how much profit you need to make from each of those engagements. Don’t go any lower.

Pitching and Proposals

Once you have determined what you’re offering, you need to create a pitching and proposal development process to win that type of work. If you provide both commodity and value based services, find out early on in the proposal process what type of buyer you are working with.

Don’t spend too much time pitching commodity buyers. Remember, price is going to be their biggest determining factor. Offer that level of service at the predetermined price. Service packages can be very helpful here. Consider starting with your lowest price or most process-driven service and create packages for buyers to choose from.  That way you can be consistent and transparent with what you offer, which will feel fair to buyers, and help your team know where the boundaries are for client service. 

Conclusion

The bottom line is that there’s room for commodity services, value based services and firms that offer both, but you cannot sell your top service for your bottom price. If you’re thinking that your firm could succeed with commodity services, know that It is possible to serve commodity buyers and make money, but you have to be intentional about it. Ultimately, you have to decide which bucket you are in and go to market that way. Knowing who you serve and what you offer is an essential part of your marketing strategy. If you would like to get more clear about who you serve and how to win the right business, contact me today.