Keys to Successful Service Marketing

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Service Marketing was a relatively new concept when I began my consulting career back in the 1980s.   High-tech service companies were just starting to run as profit centers and focus on marketing their services.  As a result, there was very little attention placed on service marketing in business schools at that time. The emphasis was on product marketing.  All the marketing literature and textbooks, all the courses, and all the conventional wisdom on the topic of marketing were centered on products.  I learned very early in my career that it is extremely difficult to market services using product-marketing ideas.  It was like trying to hammer a square peg into a round hole!

I really wanted to help my clients solve their service-marketing challenges so I began an amazing journey of helping these clients discover, develop, and implement best practices for successful service marketing.  First, I learned as much as I could about product marketing and then looked at which aspects applied to service marketing and which didn’t.  Basically, I reverse engineered product marketing to determine lessons I could learn when it came to a different kind of marketing altogether.

Second, I identified companies who already were doing a good job at service marketing. In other words, they had already gone a long way to crack the code of service marketing.  I researched what they were doing well and advised clients to model their success on these early exemplars.  In essence, I bench-marked the best practices in service marketing and then showed my clients how to implement them.

Third, I found in one individual a great teacher, mentor, and coach who helped me excel at service marketing.  That person was my late father, Donald Blumberg.  A prolific author and speaker on the subject of service strategy, he taught me what it takes to build a profitable service business and guided me in establishing my own perspectives on service marketing.

As a result of our collaboration, I developed my own understandings about successful service marketing.  I started to write articles and give speeches on service marketing, which led to more consulting work, which in turn led to greater learning on my part.  Over time, I became an expert at service marketing as I helped my clients increase revenues, boost profit margins, and improve market share.

I’m sharing this information because I want you to know that you can achieve these results, too.  More importantly, you can accomplish them in a fraction of the time it took me.  You don’t need to spend years reverse engineering product marketing or bench-marking best practices.  Instead, I’ve created a new online training course that will provide you with strategies, tactics, and insights for Successful Service Marketing. ™ As a starter, I’ve put together a brief video that describes the course content. You can access it here.  I am also providing a $100 discount on the purchase of this course during the month of May.  To take advantage of this discount, enter code SMK100 when you register.

Please let me know what you liked about this blog and your key takeaways.  If you’ve found this blog of value and think your colleagues or business associates could benefit from it, then kindly share it with them.

 

Big Data & Analytics – A Transformational Journey

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Last month I had the good fortune to attend the Reverse Logistics Sustainability Council (RLSC) and Warranty Chain Management (WCM) conferences.   Big Data & Analytics was a topic that gained much prominence at both of these conferences.  Indeed, this is a subject that is gaining much attention in business and academic circles these days.  Interestingly, there is a general consensus among academics and industry thought leaders that Big Data Analytics is one of the most misunderstood and misused terms in the business world.  For some business professionals, the term analytics applies specifically to performance metrics, for others it has to do with unstructured data sets and data lakes, while still others think it relates to predicting the future.

Big Data refers to the volume, velocity, and variety of data that a company has at their disposal. Analytics applies to the discovery, interpretation, and communication of meaningful patterns in data.  The truth is that there are actually four (4) different types of Big Data Analytics that firms can rely on to make business decisions.

  • Descriptive Analytics: This type of Analytics answers the question “What is happening?”  In a field service organization (FSO) this may be as simple as KPIs like SLA compliance or First Time Fix rate.  The exact measurement tells an FSO how well it is doing when it comes to fixing problems right the first time and meeting customer obligations for response time.
  • Diagnostic Analytics: Understanding what is happening is important, but it is even more important to understand why something is happening.  This is how managers and executives can identify and resolve problems before they get out of hand. Diagnostic Analytics provides this level of insight, for example by pin-pointing why First Time Fix Rate is low.  Maybe it’s because the company is making poor decisions about which Field Engineers (FEs) are dispatched to the customers’ sites.  Or, perhaps selected Field Engineers do not have access to the right parts when they arrive on site and must return for a second visit.
  • Predictive Analytics: Ok, so now we know why something is happening. Wouldn’t it also be good to know what is likely to happen next?  Predictive Analytics provides this level of insight. In other words, it provides a forecast about what may happen if a company continues to experience a low first time fix rate.  For example, it could show the specific impact on customer satisfaction or the measurable effect on service costs and/or gross margins.   In this case, Predictive Analytics helps a company understand with a high level of statistical confidence how long it may continue to maintain the status quo before financial problems may arise.
  • Prescriptive Analytics: The final component of analytics is Prescriptive A This level of information helps a company understand at a granular level of certainty exactly what it should do to resolve a current situation and avoid future problems.  For example, Prescriptive Analytics may reveal that a company must ensure the field engineer has the right parts on hand prior to being dispatched to arriving at the customer site.  The Analytics can show which parts must be available and where they should be located.

In summary, Analytics takes the guesswork out of decision-making.  Instead of relying on intuition or prior experience, service executives can make sound business decisions based on objective analysis of data.  As a result, the probability of making the right decision increases.   Relying on Analytics to drive business decisions involves a transformational journey.  As innovative as it seems, a company cannot just start using Predictive or Prescriptive Analytics. It must first become proficient with Descriptive Analytics before it can leverage the power of more advanced analytic models.    This journey is not just about the data.  Many managers mistakenly believe that they must have enough of the right data to make Analytics work.  The truth is that we all have a wealth of data at our disposal.  Our challenge is finding the tools and technology to process the data, making Analytics a winning business proposition.  This begs the question: does your service organization have an optimal system in place to harness the power of Analytics?  If you are not certain, it may be time to conduct an audit and assessment of your infrastructure.  To learn more, schedule a free consultation today.

Strategies for Reducing Warranty Costs

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Warranty obligations represent both an expense and a liability to Original Equipment Manufacturers (OEMs). As a result, anything that an OEM can do to minimize warranty expenses and liabilities will have a significant impact on the balance sheet and bottom line. In the high-tech industry, warranty coverage often includes repairing defective products as opposed to crediting or replacing them. Warranties of this nature involve three (3) cost components: 1) Warranty Terms & Conditions, 2) Service Delivery, and 3) Product Reliability and Maintainability.

Service Delivery represents the largest of these three components and comprises approximately two-thirds of warranty costs. Approximately 55% of service delivery costs are attributed to repair activities. The remaining 45% of costs are evenly distributed between parts, logistics, and overhead (e.g., customer service, IT, etc.).

Among the three (3) different categories of warranty costs, service¬–delivery costs are the most difficult to manage and improve. By comparison, costs associated with warranty terms and conditions and product reliability and maintainability are easier to manage. OEMs can reduce warranty expense and liabilities by adjusting terms and conditions to make them more favorable from a cost-burden perspective. OEMs can also design and engineer better products thus reducing product reliability and maintainability costs. In addition, the time frame and investment required to plan and implement these types of improvements are smaller when compared to service delivery. On the other hand, these improvements may have a limited life span. In other words, an OEM needs to revisit terms and conditions as well as product reliability and maintainability issues with every new product release.

In contrast, a significant amount of time and investment is required to improve costs associated with service delivery. For example, it may take months or years of planning and hundreds of thousands of dollars of investment to realize service-delivery cost savings. However, the improvements are sustainable over a longer period of time because they don’t just affect costs associated with one-time product launches. Instead, they benefit subsequent product launches over a multi-year period.

The reason it takes more time to implement and greater investment to achieve cost savings in the area of service delivery is because it typically requires improvements in processes, infrastructure, and people (i.e., training). Examples of the types of strategies for reducing service delivery costs include but are not limited to:
Automating warranty claims-management processes to reduce warranty processing costs
Improving call management procedures to validate entitlement, troubleshoot and diagnose calls remotely, and avoid costly field service visits
Implementing dynamic scheduling software to improve field-engineer productivity and reduce travel costs
Adopting a Variable Workforce (VWF) model to lower field-service and associated overhead labor costs
Utilizing knowledge-management tools to improve resolution times, reduce No Fault Found rates, increase first time fix rate, and improve labor efficiency
Implementing advanced planning and forecasting tools to optimize spare parts stock levels and reduce inventory costs
Making it easier for field engineers to identify, locate and order spare parts thereby improving service efficiency and avoiding repeat calls due to lack of parts

In summary, the challenges associated with reducing service-delivery costs should not prevent a company from making the necessary systemic and procedural improvements since the gains in cost savings, service productivity, operating efficiency, and customer experience can be significant.

The Five Most Important Trends Impacting the ITAD Market

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In my last blog post, I provided a high level summary of key findings from the recent market research study we conducted for Arrow Electronics on the topic of IT Asset Disposition Trends.   Now that I’ve piqued your interest, I thought I’d share five important data points from the survey results:

  1. 9 out of 10 companies in 2014 have a formal end-of-life ITAD strategy
  2. Nearly 2 out of 3 companies surveyed choose to have a 3rd party service provider manage their end-of-life assets
  3. The most important factors in selecting a 3rd party service provider are adoption of compliance standards, well documented chain of custody, and high quality reporting
  4. 95% of companies feel that R2 and/or e-Stewards are the most important environmental standards related to ITAD
  5. Nearly 9 out of 10 companies feel that R2 and e-Stewards should be combined into a single standard

 

These findings validate the fact the ITAD has gained increased attention among not only IT Managers but C-suite executives as well.  However, these findings reveal that most companies do not view ITAD as a core competency.  Instead they choose to outsource it to 3rd Party Service providers.  This explains the increased level of competition within the ITAD market as more and more companies enter this space.  It is not just start-up specialized ITAD vendors that are pursing this opportunity but well established IT Service providers and distributors like Arrow Electronics who view ITAD as a natural extension of their product and service offerings.

Given the large playing field of competitors, end-customers are becoming increasingly selective about who they choose to conduct business with.  Among the most important factors are compliance standards, documented chain of custody, and IT reporting and analytics.  It is interesting that while R2 and e-Stewards are perceived as the most important environmental standards, an overwhelming majority of end-customers believe that they should be combined into one, single standard. This suggests that these standards are used interchangeably by end-customers.  Possessing one or both of these industry standards is simply not enough for an ITAD service provider to differentiate itself in the marketplace. While many companies can lay claim to a well-documented chain of custody and superior reporting capabilities, we believe that its additional industry standards such as RIOS, ADISA, NIST, and knowledge of best practices to minimize risk, reduce waste, and maximize recovery values that set one ITAD vendor apart from one another.  If you haven’t read the Arrow IT Asset Disposition Trends Report, we suggest you obtain a copy, click here.    To discuss the implications of this report on your company or business, feel free to schedule a free 30-minute strategy session with us today.

The Impact of IoT on Enterprise Service Management – Part II

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As follow-up to last week’s blog post, I wanted to share some more answers to Frequently Asked Questions (FAQs) about the impact on IoT on Enterprise Service Management (ESM):

  1. What new skills sets are required to support an IoT environment?   IoT generates an extensive amount of real time data, some of which of is unstructured. In order to make use of this data in any meaningful way, a service provider will need to employ “data scientists”. These are individuals skilled at analyzing and interpreting data through predictive analytics.
  2. What impact will IoT have on Call Center personnel? The always on nature of IoT and its ability to send automatic alerts to the service organization will reduce the demand for personnel that handle basic call handling and dispatching procedures. However, there will be a greater need for remote support personnel with the ability to monitor service events in real-time, apply predictive analytics, and initiate corrective action.
  3. What will be the role for Field Service Engineers (FSE)? IoT has the ability to improve the percentage of service events that are resolved remotely without dispatching a FSE.   This does not necessarily equate to a diminished role for FSEs. In fact, the need for FSEs will increase. First, FSEs will be required to deploy IoT solutions. Second, FSEs will be needed to provide onsite diagnostics and troubleshooting when remote resolutions prove ineffective. Third, FSEs will function in the role of onsite consultant in helping the customer obtain maximum benefit from the technology operating at their site.
  4. How will IoT impact the Supply Chain?  Most people agree that IoT will enable Supply Chain personnel to proactively ship a replacement part or consumable to the end-customer before the customer is even aware of their need. The reverse logistics supply chain will also benefit from IoT in the sense that it will gain better visibility into events occurring at the field level that impact demand on return center and depot repair operations.

I know that these answers barely scratch the surface of the questions people have about the impact of IoT on Enterprise Service Management (ESM).  In the weeks and months ahead, I will continue to share my insights on IoT and ESM.  As always, I am interested in other people’s perspectives on this subject.  Please feel free to post any comments, thoughts, or fun facts that could help advance the body of knowledge around this subject.

The building blocks to Servitization

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The “Servitization” of Manufacturing is taking the High-Tech Industry by storm!  By definition, Servitization is a transformation from selling products to delivering services.  It typically involves two components:

  1. The idea of a product-service system – an integrated product and service offering that delivers value in use.
  2. A “Servitized” organization which designs, builds and delivers an integrated product and service offering that delivers value in use

In more practical terms Servitization turns the product–service offering into a “utility” that the customer pays for on a subscription basis.   Under this model, the customer pays a monthly or annual fee equal to the amortized cost of the equipment plus the value of services provided for a specified period of time.

The concept of Servitization is nothing new. As early as the 1950’s, manufacturers provided their customers with the option to lease equipment with services attached to the lease agreement.  In the late 1990s and early 2000s, companies like ABB and GE begin to offer tperformance based service contracts to their customers.

Servitization is more than just a pricing strategy.  It is an overall business model that attempts to maximize and monetize value in use to the end-customer. This requires a manufacturer to proactively identify all the services that an end-customer may require over the lifecycle of equipment operation, understand the value that the customer assigns to these services, build this value into the subscription pricing model, and then deliver on that promise.

The trend toward Servitization has picked up steam in recent years for a number of reasons. First, market participants (i.e., OEMs and End-customers) have a greater appreciation of the strategic value of service to their overall business models.  Second, manufacturers recognize that service can generate more revenue over the lifecycle of the equipment than the actual purchase price of the equipment itself.  Third, the Great Recession forced many manufacturers to rethink the economics associated with how their customers justify the acquisition of new equipment.  Fourth, service tools and technology are now available that facilitates the design and operation of an integrated product-service system in a cost effective and real-time basis.

Ultimately, it’s the technology that is having the greatest impact on advancing Servitization business models.  There are some basic building blocks that any company will need to implement in order to deliver on the promise of Servitization. First, they’ll need a state-of-the-art service management system. It needs to perform the basic activities involved in managing a service organization (e.g., dispatch, scheduling, parts management, etc.). Second, they’ll need to have a way to connect with and monitor the condition of equipment within their serviceable installed base.  They will also need to integrate this information into to their back-end service management system. The third step is a mobility solution to communicate with people in the field. Finally, analytics are needed to evaluate what’s happening. Most companies will probably benefit by using a big data solution, as well, so they can look at unstructured data from their installed base and the customer’s environment at large, and start to analyze, predict and forecast.

In summary, Servitization is a transformational process that requires manufacturers to rethink all aspects of their business from marketing and sales, to pricing and financial management, to service delivery infrastructure.  The benefits of Servitization are great including the ability to build a multiyear annuity stream, gain account control, and create deeper and longer lasting relationships with customers.

I’d love to get your thoughts on Servitization.  Let me know if your company is pursuing Servitization.  What benefits do you expect to achieve? What obstacles remain in the way to realizing these benefits?   Last but not least, if feel free to schedule a strategy session with me if you want to discuss how Servitization could impact your business.

Key Performance Indicators and their impact on your business

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I gave a presentation a couple of years ago to a group of service managers and executives on the subject of key performance indicators (KPIs).  I was surprised by the fact that most of the audience could not give an accurate explanation of what a KPI is.  Most people thought it was a data point that was used to measure business performance.   However, this is not entirely accurate.

The true definition of a KPI is that it is a quantifiable measure of how successful an organization’s strategies are in meeting their goals.   To be effective, KPIs must be specific to your business needs, align with strategic goals, and bring overall benefit to your business.  Most importantly, it must inspire you to set new goals.

Unfortunately, many service managers confuse KPIs with industry performance benchmarks.  They are not the same thing.  In contrast to a KPI, a benchmark is a point of reference against which things may be compared or assessed. While a company might want to benchmark their KPIs against competitors in their industry, they shouldn’t assume that they must adopt the same KPIs as their competitors.  They might want to do this if their goal is to outperform competitors on every KPI they measure.  This may be neither practical nor feasible if their business needs and strategic goals differ from those of their competitors.

Let’s look at this from another perspective.  While there maybe dozens of different field service or reverse logistics activities that your company can measure, you’ll find that there are only a handful that ultimately drive the success of your company’s business strategy.  You’ll want to make these specific measurements your KPIs.   For example, your strategic goal may be to consistently meet your customers’ expectations for timely service.  There could be multiple factors to consider when measuring this outcome like response time, wait time, resolution time, call drive time, etc.  However, you may determine that SLA Compliance is the KPI that best measures your success or failure in meeting this strategic goal.  On the other hand, your strategic goal might be to deliver high quality service to your customers.  While this could be determined through factors like trunk stock fill rate or calls closed incomplete due to lack of parts, you determine that First Time Fix Rate is the best KPI measuring service quality.

When establishing KPIs, it is important that you answer these four questions:

  1. How will I know when my goals are reached?  This is a quantitative target that you want to establish for your KPI. It could be expressed as a raw number (i.e., 4 hour average response time), a progress measure (e.g. 98% SLA compliance), or incremental change (i.e., 10% improvement in Customer Satisfaction).
  2. What are the key success factors in reaching this goal?   A description of the core functions, activities, or business practices that must be performed in order to reach this goal.
  3. What critical actions do I want to take from the KPIs? It is important to anticipate how your company will react to the KPI measurement that it actually achieves. What steps do you take if you miss your target? What if you meet or exceed it? For example, hire more resources, retrain personnel, improve processes, implement new systems, etc.
  4. What results do I achieve through these actions?  Examine how these actions will impact your business.  In what timeframe will they impact your KPI and at what cost?  Are there other aspects of your business that will be impacted?

 

By answering these questions, you’ll have a strategic road map for achieving operational excellence in your business.  It’s all about getting clear about your goals, making sure you measure the right things, tracking results on a consistent basis, taking corrective action when needed and, of course, celebrating success. Do you want to learn more about how to achieve geometric results in your field service or reverse logistics business?  Schedule a free strategy session today.

For whom the bell tolls: examining the future of field service

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I remember attending a conference in the early days of my career, circa 1987, where service executives from leading computer manufacturers at that time (e.g., Digital, Control Data Corporation, Burroughs, Univac, etc.) were predicting that field service would become extinct by the beginning of the 21st century.  Their prognosis was based on an observable trend that the equipment was becoming more reliable and easier to support remotely. Thirty (30) years later Field Service is a booming industry.

Indeed, many of these predications have come true. Technology has become cheaper and more reliable. Product life cycles are shorter, making it more affordable to replace older systems.  M2M and remote support make it possible for many companies to resolve an issue remotely and avoid dispatching a field service engineer. Self-service options also make it possible for the consumer to manage the repair process themselves.  It has also become an accepted fact that field service is a low margin business and extremely competitive in selected markets (e.g., IT).

Do these trends support the argument that field service is going the way of the dinosaur?  Market data points to a different conclusion. According to the research firm Markets and Markets, the Global market for Field Service Management (FSM) software is expected to grow from $1.58 billion in 2014 to $3.52 billion by 2019, at a Compound Annual Growth Rate (CAGR) of 17.3%.  Certainly these figures do not suggest that field service is going to disappear anytime soon.

Although the High-Tech Industry has experienced a number of trends which challenge the need for field service, there have been a number of trends which will allow field service to continue to survive and prosper:

  1. Increased use of advanced technologies:  Tools such as dynamic scheduling, mobility, knowledge management, and spare parts planning software enable Field Service Organizations (FSOs) to optimize the coordination of resources (e.g., parts, labor) required to support the field service delivery process resulting in more satisfied customers, increased revenue, reduced cost and higher profits. Furthermore, disruptive technologies like IoT and Big Data provide FSOs with the tools to expand their service offerings and be more proactive in managing service delivery. As a result, customers are more dependent on FSOs than ever before for continued support.
  2. The advent of on-demand platforms: On-demand and SaaS based applications enable FSOs to obtain critical service applications required to manage the field service dispatch on a subscription basis. This permits FSOs to quickly acquire and deploy state-of-the art Field Service Management Systems (FSMS), which at one time required a considerable capital outlay. This means that FSOs can expense the costs associated with the new system into their operating budgets and profits and avoid building elaborate ROI justification models. As result, the economics associated with maintaining a Field Service workforce have improved.
  3. Greater complexity and convergence of technology: Every major technology sector ranging from information technology, to telecommunications, to plant automation and building controls, has experienced a trend of equipment becoming increasingly more integrated with microprocessors, hardware and network operating system software, broadband communications, and network connectivity equipment. This complexity has led to new requirements for fast, reliable, and high quality field service in many segments.
  4. Acceptance of trade-off between remote support and field service: Manufacturers now accept the fact that there are trade-offs in cost and customer satisfaction in attempting to resolve all service requests through remote support tactics. Although remote support can be very effective in lowering operating costs, and eliminating the need for field service dispatch, there is a point in every service call, where it becomes more effective to dispatch a Field Engineer. The greater the complexity of the service problem, the longer it will take to resolve remotely resulting in longer downtime for the customer and higher support cost for the service provider. Field service dispatch can mitigate these costs and help to resolve the issue sooner.
  5. Growth in Servitization: Manufacturers continue to look for opportunities to generate income through the provision of value added services such as installation, integration, configuration management, training and process improvement. Field Service Engineers represent the most likely resource for delivering these services. Furthermore, many Servitization business models have their foundation in IoT and connected devices. Manufacturers are of course turning to their FSOs to roll-out and deploy these solutions.

Why were the service executives in the late 1980s so far off in their predictions? I think it was because they could not anticipate how innovations in software and technology could go on creating new revenue opportunities. Conventional wisdom at that time viewed innovation as a way of cutting costs, and of course, the biggest cost, was people (e.g.., Field Service Engineers). More importantly, most companies viewed Field Service as a cost center, not as a profit center. As a result, they were not thinking strategically about innovation. It is amazing how things have changed. To quote the old Virginia Slims commercial, “we’ve come a long way baby.”

Now it is your turn. Please share with me your ideas on the future of field service.   Let me know if you remember any predications from the past that are no longer true today. Tell me about your vision of the future. Will field service continue to thrive or will field service engineers become irrelevant? I’d love to get your thoughts on this important topic.

6 Things You Need to Know When Purchasing Service Lifecycle Management Software

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I’ve spoken with numerous service executives over the course of my career  about their experiences when purchasing enterprise software for service management (also known as Service Lifecycle Management (SLM) software).  I’ve distilled the knowledge I’ve gained into 6 tips to help you when you are in the market for enterprise service software.

 

  1. What to expect in the sales process?

You are likely doing research before you ever even engage a vendor, but when it’s time to start talking to software providers, what should you expect?  First of all, most vendors will give some sort of brief, high level demonstration of the software during your initial call. This typically is just meant to give you an idea of how the software works. More detailed, customized demos will follow and at this time more thorough vendors will ask you to fill out a demo prep form so they can tailor the demonstration to your needs. You may also be asked to sign a non-disclosure agreement so the vendor can freely share confidential information. Don’t expect more than a ballpark figure of the cost of the software on the first call; you’ll need to fully discuss your needs and expectations before getting more detailed pricing. This process also provides the opportunity for you and the software vendor to determine if you are the right fit for each other.

 

  1. What to look for in a vendor?

There are a number of vendors offering Service Lifecycle Management software. Wading through the options can be overwhelming. The top three factors are software feature and functionality, technical competency of vendor, and vendor flexibility. Once you have vetted all vendors on these top 3 characteristics, you will likely have a short list of vendors that you want to explore further. At that point, you’ll need to evaluate the Total Cost of Ownership, implementation schedule, and vendors’ knowledge of your business. These factors can make or break the success of your SLM implementation.

 

  1. How important is price?

Price is far from the dominant factor when purchasing service software.  As it often happens, the lowest priced vendors are ruled out because they lack the functionality and/or are perceived as lacking the resources to support the implementation while the highest price vendors are often perceived as offering solutions that are too complex to implement. So while price is a consideration, making sure that the vendor can provide a solution that truly fits your needs is far more important than price.

 

  1. How important is the role of discounts in the buying decision?

Discounts are common when pricing software so there is often some room for negotiation. Truth be told, the discount doesn’t make or break the sale.  Highly competitive situations may result in larger discounts.  Be wary of a vendor who drops the price too much without asking for a concession. The lower price may come back to haunt you during the implementation or when you require post implementation support.

 

  1. CRM/ERP or best of breed service software?

For SLM software, there are often three choices: buy service software from your CRM vendor, buy from your ERP vendor, or select a best of breed service software provider. While you may think it’s easier to just use the company that you are already using for CRM or ERP, you need to consider the benefits of a best of breed solution. Best of breed vendors place their sole focus on the services side (e.g., field service, service parts, depot repair, etc.) of the business. Furthermore, best of breed software solutions are built to contain all the functional requirements to support the full service lifecycle management process in an organization. While you may not need all of the functionality now, you should be evaluating solutions with an eye toward the future.

 

  1. What happens after the sale?

Sometimes SLM deployments fall short of expectations. For example the implementation did not go as smoothly as planned or there were problems with the vendor’s level of support post implementation.  To avoid these situations,  it is important to understand exactly what the vendor’s expectation are of you during the implementation as well as understand the level of resources the vendor will commit over the lifecycle of your purchase.  Reference checks of companies similar to yours in terms of technology supported, size, and financial structure are a must.  You’ll also need to get a clear idea of the skill sets, experience, and capabilities of the individuals supporting the implementation. How much experience have they had in implementing the version of software that you are about to purchase?   A well-defined Service Level Agreement with penalties for non-compliance will also help to keep the vendor accountable during the support phase.

 

Purchasing any kind of software can be daunting, but when you are purchasing a mission critical solution, like Service Lifecycle Management, the stakes are especially high.  As they say, knowledge is king so the more you know about what to expect before, during, and after the sale, the more likely you are to succeed.  Need more information to ensure a successful outcome?  Schedule a free consultation to discuss your issues.

The Gift of Competition

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I received a very interesting email last week from a manufacturer of industrial automation equipment. It was a marketing piece promoting the use of their “original” spare parts over “generic” parts sold by third party providers.  I gather this manufacturer was losing market share in the Aftermarket and was taking steps to rectify.  I don’t know how I got on this mailing list because I don’t own any of their equipment.  Nevertheless, what I found so troubling about the email was that it attempted to discredit “generic” parts by claiming that they were cheaper in price because they were of inferior quality.

I find these types of claims troubling for three reasons.  First, they “trash the competition”.   Effective marketers and sales people know that going negative is not good for business.  Most manufacturers would not use this approach when it comes to selling their equipment in their primary market. Yet some believe anything is fair game in the Aftermarket.  The second reason why I oppose this type of advertising is because it’s just not accurate.  The truth is that generic spare parts can be more reliable than original parts. This is because third party manufacturers often spend many hours reverse engineering original parts in order to learn how to design and manufacture new ones.  In doing so, they can find ways to improve upon the design and reliability of the original part. This is particularly true of remanufactured parts.  Third, in some markets the parts used by OEMs and Third Parties are the exact same parts.   For example, a device assembled with commercially available off the shelf (COTS) parts.

The bigger issue is not about false advertising but about what role Third Party Maintainers (TPMs) also known as Independent Service Organizations (ISOs) and Generic Parts Manufacturers play in the Aftermarket.  Obviously, these providers create competition for OEMs.  However, this type of competition is really not a bad thing for a number of reasons:

  • It legitimizes the market – – Markets are defined by the presence of competition. In order to win business, competitors must actively market their products and services. As a result, customers become more aware of the options available to them and purchase more quantities and more frequently.
  • It creates choice – Competition offers customers the freedom of choice. The theories of capitalism and free trade are built on this basic premise.
  • It improves quality & efficiency – Competition in the Aftermarket forces third parties and OEMs to continue find ways to improve the quality of products and services offered while at the same time finding ways to cut costs and improve efficiency.   In other words, competition raises the bar and results in better prices for customers.
  • It leads to innovation – In addition to raising quality and improving costs, competition drives service providers to become more innovative. Without competition, it is hard to know whether or not service providers would focus on finding ways to add value. Would service providers be just as compelled to invest in new systems and technology like SaaS, Mobility, and IoT if not for the impact that competition has on innovation?
  • It leads to greater cooperation – OEMs also have the choice to subcontract service to TPMs/ISOs. This can help them improve their own cost structure, fill in white space in service delivery, and obtain access to capabilities that they may not otherwise be able to build themselves. Under this scenario, OEMs and ISOs can learn from each other and use this knowledge to drive innovation, reduce costs, and improve quality

In summary, competition in the Aftermarket is good for all parties concerned.  Everyone benefits; from the customers to the OEMs and third party providers. Even the technology vendors benefit from competition in the Aftermarket.  Quite frankly, any company that feels that is has to trash their competition is probably troubled in some way.  Rather than resort to this tactic, a company that is very concerned about their competition is advised to look within their own organization to find ways to leverage competitive forces to their strategic advantage.

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