Risk Reversal for Service Businesses?
February 28, 2008
The traditional idea of “risk reversal” as a marketing strategy for a service business has always rubbed me the wrong way.
You hear a lot of marketing gurus talk up a storm about it. And it always sounds so logical and easy when they say it from the stage (usually as part of their pitch).
But when you get back to your office and start trying to put it into practice, it doesn’t seem quite as simple.
At least not for me.
Part of the problem is me of course. And the big “personal accountability” streak I seem to have been afflicted with. Getting up in the morning is a risk. If you can’t handle it, just go back to sleep.
The problem is that “personal accountability” is a bit of a hard sell in the marketplace.
But the bigger challenge is really about how to apply the idea of “risk reversal” when you’re NOT selling a product.
Risk reversal is fairly straightforward if you’re selling widgets. After all, if someone returns a widget, chances are, you can resell that widget.
So while you say that “all the risk is on MY shoulders” when you’re selling a widget… the truth is, the amount of risk you’re accepting is pretty darn small.
But what about when you’re selling services… and doing it in a business where there really ARE no guarantees?
Take my business–marketing consulting and copywriting.
I help my clients leverage the value in their businesses and create higher bottom line profits using some very powerful tools: proven marketing/business strategy and copywriting that actually gets people to take action.
But here’s where I’ve always run into a problem trying to add in the idea of risk reversal.
As a business owner, should I REALLY accept the risk for the success of a project when I do not control all of the factors that are required for that success?
After all, I can’t control whether my client’s product is a good one.
And I certainly don’t control whether my client is marketing a product that someone actually wants.
I used to accept that risk anyway… I put the burden of proof that I could deliver real results squarely on my shoulders.
Risk Reversal 101.
But I eventually realized that was a bit like lying down in the road and giving my client the choice to drive over me or not… based on how the market reacted to his products.
It was painful… and very expensive. Mainly because there was little accountability required on my client’s part to accept a proposal like that.
Think about it:
Do you really want clients and customers to do business with you simply because there is NO risk to them?
Where there is no risk, there is no accountability. There is no “skin in the game.” That’s a problem.
Eventually, I discovered a better way.
Perhaps you can apply this to your business. Here’s what I discovered:
Sometimes, the solution to a problem is to realize that the “Problem” is just a symptom of the REAL problem.
I finally realized that the REAL problem wasn’t the idea of risk reversal at all. It was simply how I was viewing my client/customer.
Let me explain what I mean.
Many businesses view their customers/clients as adversaries. The business owner has to convince the customer/client to buy the product or service in question.
Instead of reversing the risk, which makes the boundary between your business and your prospect even more pronounced, consider this:
Why not get up out of your chair, walk around to your PROSPECT’S side of the table and have a seat right beside him?
I’m speaking figuratively here…
Align your goals with your prospect’s goals and accept shared risk as “partners” for what you’re trying to achieve together.
That’s not a hard sell when your goals are aligned with the goals of your client or customer. When you succeed, they succeed.
For me, that’s why I’ve stopped looking for “clients.” I’ve stopped providing “deliverables…” And I’ve stopped accepting responsibility for things that are beyond my control.
Now what I’m really after are STRATEGIC “PARTNERS.”
Businesses who are looking to create big results and share the risk of getting to those goals.
Sure I still charge a fee for my work, regardless of the outcomes. But that’s because value is being exchanged.
But the majority of my compensation comes when I help my client succeed.
Now there is one problem with this strategy. To get prospects that are savvy enough to see the value in a situation like this, there’s a good chance you’ll need to tweak your marketing systems to generate a higher quality prospect.
I know I did.
If you’re in the service business or offer a service related product somewhere in your business, then give this some thought.
Instead of “reversing the risk,” try “minimizing” the risk and arranging things so you are perceived as a partner of your client, not just a service provider.
And have the courage to stand up and say that you can’t accept responsibility for things that are outside of your control. But you CAN accept shared responsibility for helping your client achieve their goals… as long as you are both rewarded for doing that.
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