"I'm selling a relationship, not just a product," says today's enlightened CEO. To first-time entrepreneurs, however, selling a commodity may appear a lot easier than the amorphous goal of creating a relationship with customers.
But the commodity approach hides pitfalls. Take the experience of Tyler Phillips, who in 1982 founded the Partnership Group, a pioneer in child-care and elder-care referral services, in Lansdale, Pa. To get a foot in the door of large corporations, Phillips offered an information kit spelling out the range of his company's services. He hoped the corporations would promote the kits to employees.
The kits did open doors but did little to create rapport with clients' employees. "The kits were easy to sell but difficult to keep reselling," says Phillips. He lost money on them for about a year and a half.
In focus groups, customers' employees said they wanted their questions answered by a person, not a kit. That was a turning point for Phillips. He switched to offering corporations more of a consulting service -- giving their workers unlimited access to the Partnership Group and helping to create new options, such as the "FirstNest" program for infant care in 12 communities.
Phillips changed from per-kit pricing to an annual fee that covers a client's total work force. Today, about 10 years after abandoning the kits, Phillips reports that most of his 109 contracts are for three years, and 20 are open-ended. The company is profitable on $9 million in sales.* * *