Revenue growth is probably the single most important objective for executives who are responsible for managing service as a profit center or strategic line of business. “I want to double my service revenue in the next 3-5 years” is an incantation that I hear constantly from business owners and executives. That equates to a 20% or more growth rate per year. Sure, this type of growth is easily achievable if the market is growing at this rate or faster. I’ve found that these high growth targets are often triggered by management’s desire to take back market share from competitors or increase the share of service revenue contribution to overall corporate revenue.
While high revenue growth in a low growth market is difficult, it’s not impossible. A little hard work is usually required to achieve this type of performance. To understand where the emphasis is needed, let’s look at where service market programs may fall short:
- Service Portfolio not meeting customer needs: Quite often service providers fail to meet their revenue objectives because their service portfolio is no longer meeting customer requirements. In other words, they have failed to offer services tailored to their customer needs. For example, offering only next day response when customers require same day.
- Pricing not optimal: If your revenue is flat or declining, you might want to look at how you price your services. Perhaps you service prices are no longer competitive. On the other hand, you may be underpricing your services in relation to the value you provide.
- Failure to understand competitive threats: Many service providers, particularly those that are divisions of manufacturers, fail to understand the competitive threat of “mom & pop” third party maintenance (TPM) companies and/or in-house service providers. For example, they often under estimate the value that TPMs provide to their customer and/or fail to develop an effective value proposition to compete against them.
- Failure to articulate value: How well have you articulated the value of your service offering to current and prospective customers? Do they understand the cost of downtime or the pain points that your services help solve? It is important that you not only articulate value to your customers but make sure that your sales people understand it and provide them with the appropriate sale aides and marketing collateral to support it.
- Lack of communication & follow-up: One way to increase service revenue is by improving contract renewal rates. These rates often decline though lack of consistent communication and persistent follow-up about the value of services provided, when contracts are up for renewal, special incentives for renewing, and information on when they are about to expire.
- Not asking for referrals: Referrals are the best and least expensive source of qualified prospects. The problem is most service providers forget to ask for them. Remember your customers speak to each other. They may be involved in the same networks and trade associations, or call on each other for advice and guidance. Why not enlist them in your business development efforts?
- Lack of customer appreciation: Your customers will remain loyal to you and purchase more from you when you let them know how much you value and appreciate them. It’s the simple things like a courtesy phone call/visit, thank you card, small gift (i.e., rewards program), or special offer that let them know you value their business.
These seven areas have one thing in common, they all benefit from market research. Whether its information that will help you redesign your service portfolio or modify pricing, market research provides you with an unbiased and unfiltered perspective on what your customers are actually thinking and saying. You will learn things that you may not otherwise from a sale’s call or courtesy call made by a company executive.
Before you conduct research or make any changes, it is important that you have a baseline assessment of how well you service marketing program is working. You may want to consider an audit from an independent and objective industry consultant. Schedule a free consultation today to learn more.