Six Keys to Effective Benchmarking

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It is part of our human nature to compare ourselves to others.  In business this practice is known as benchmarking.   A good criterion of an effective benchmark project is that it provides objective data to answer specific questions about a company’s performance relative to others in their industry.  It is important to have a clear outcome and purpose in order to get good data.  Here are some guidelines to help you achieve the best results:

  1. Benchmarking is a means to an end – it is not an end to itself. Quite often, managers and executives want to use the data to prove a point. Benchmarks are nothing more than a measurement. Like most measurements we need to do something with the information. Often times the benchmark results raise new questions, usually about strategy or operations that must be answered and acted upon. Have a clear objective of what you are measuring and even clearer about what you are prepared to do once you review the results.
  2. Improvement not validation – Don’t go into benchmarking with false expectations. The results will do far more than validate how you are doing; it will provide insight on where you can improve.   Rarely does a company engage in a benchmark study only to learn that everything is fine and dandy with the current status quo. Don’t for a moment think that there is nothing new to learn either. I’ve worked with many companies who commissioned benchmark studies to validate the need to make a change in one area only to learn that the perceived issue was only a symptom associated with a different problem.
  3. Scratch below the surface – Thoroughness is the name of the game when it comes to benchmarking.   Often times the answers are hidden well below the surface.   It is the job of the benchmark analyst to be an agent of change. This requires that they dig deep and go wide. Performance in one area may be directly related to a performance in another. There are a number of factors that impact performance.   Quite often these factors are the root cause of the problem and/or a function of the underlying systems and processes being measured.
  4. Look for relationships – You must understand relationships in the data if you are going to interpret it correctly. You also need to be good at spotting patterns. The goal of benchmarking is to get to the root cause of the problem and identify where improvements need to be made. Quite often only one or two corrective actions are needed to make significant performance improvements in multiple areas. This is only possible if you can effectively observe patterns and relationships in data.
  5. Seek advice of an expert – Let’s face it benchmarking can be a complex task. Work with someone who has been there before. Find someone who understands your business and the industry you are in.   More importantly, make sure you find someone who understands what’s possible within the realm of reason so that you can innovate. Ideally, you’ll want to compare you company not only to direct competitors in your market but to best practice companies in any industry or market place with similar characteristics.   After all, your customers will do this. Why shouldn’t you? It is likely you will want to hire or retain an experienced industry expert to help you with this analysis.
  6. The answers are within you – There are times when there will be anomalies in your data and sometimes these anomalies contain tons of answers to why things are the way they are. The only person who can explain this is you. Also, one thing for certain is that even the greatest expert in the world can’t make decisions for you. Only you can do this.   You’ve completed your benchmarking efforts now it is time to make real change.   Whether you use a consultant to help you make this change is up to you.   It is all about being resourceful and we all have this capacity within us.

Takeaways – Benchmarking is a strategic endeavor that must be part of every executive’s tool kit.   As the old adage goes, that which gets measured gets improved. This is the primary objective of any benchmarking effort.   The ability to effectively analyze patters and relationships in data is critical since root cause of performance is often systemic or procedural in nature. The experience and perspective of an objective third party advisor can ensure quality results and an efficient process.   While experts can’t make decisions for your company, they can serve as a valuable guide in helping you find answers.

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.

5 New opportunities created by IoT and the challenges they present

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There has been some excitement in the media these days about the Internet of Things (IoT) and the promise it creates for businesses, consumers, and governments.  John Chambers, the CEO of Cisco, said on CNN’s GPS with Fareed Zakaria that IoT will create approximately $19 Trillion in economic value over the next 5 years.  As an example of the opportunities that are possible, Chambers points to the fact that the city of Barcelona created 40,000 new jobs through its connected city initiative.

While the upside potential is great, there are still many who believe that the disruptive force of IoT will have a negative impact on certain industries; eliminating jobs and destroying businesses instead of creating them. The proponents of IoT remind us that similar claims were made about the internet in its early days. However, according to a 2014 study by McKinsey and Company, 2.6 new jobs were created by the internet for every 1 job it eliminated. Will the same be true for IoT?

To answer this question, I think we have to look at how IoT will impact specific industries.  For example, let’s look at five (5) new opportunities that IoT creates for the High-Technology Service & Support Industry and the challenges they present.

  1. Facilitation of Remote Monitoring & Diagnostics: IoT makes it possible for manufacturers to implement remote monitoring and diagnostics solutions on a low cost and rapid basis. Of course, these solutions are as effective as the knowledge management tools behind them. Nevertheless, remote diagnostics can eliminate the number of emergency dispatches which in turn could have an impact on Field Service Engineer staffing levels. On the other hand, it is likely that new jobs will be created to monitor and analyze the data collected by these solutions as well as respond to the actions that are generated by this analysis.
  2. Greater integration with the supply chain: One the largest beneficiaries of IoT will be the service supply chain. By monitoring service related events, the service supply chain can have more visibility into the demand for spare parts and be more effective in planning and forecasting inventory stock levels. In addition, supply chain mangers can be more proactive in anticipating demands on forward stocking locations and depot repair & refurbishment centers. The net impact of IoT on the supply chain is an enhanced level of productivity and efficiency which is great for profits and job creation.
  3. Creation of barriers to entry: It is very possible that IoT will create new barriers to entry for service competitors. That is because once you control access to a device, you control the device itself. Manufacturers will need to think through how their channel partners participate in IoT solutions. Will channel partners participate in the revenue stream that comes from managing connected networks or will they simply resell the solution on behalf of the OEM? What options will be available when it comes to service & support? Will manufacturers implement open systems which make it possible for anyone to service the network or will be a closed solution keeping out competition?
  4. Collaboration between business partners: It is also likely that IoT solutions will be comprised of products and components from multiple suppliers. This will require greater collaboration between business partners. Manufacturers will need to establish new business protocols and rules of engagement when it comes to supporting IoT solutions involving third party products. This is likely to result in new job creation.
  5. Need for new business models:  IoT makes it possible for manufacturers to offer new added value services to their customers. At issue, these services are most likely to be monetized through subscription based models. New financial KPIs will be needed to manage these models. Instead of focusing on attach rates and gross margins, manufacturers will need to pay attention to monthly recurring revenue (MRR) and customer churn rates.   Revenue ramps up slowly under these scenarios and customer attrition rates are high so manufacturers will need to create marketing and onboarding programs to facilitate growth of MRR and reduce churn.

 

In summary, IoT will have a positive impact on the High Tech Service & Support Industry in terms of job creation and financial returns.  Indeed, IoT is likely to create multiple new jobs and businesses for everyone that it replaces.  While some companies and individuals may be at risk, they can mitigate the downside by taking a proactive approach to strategic planning.  Furthermore, companies who stand to benefit from IoT the most can ensure maximum returns, and thus double down on their investment, by incorporating fundamental strategic design principles into the development of IoT solutions.  To learn more, schedule a free consultation.

Strategic forces shaping the deployment of IoT & M2M

The Internet of Things

News about the Internet of Things (IoT) is everywhere. Indeed, IoT is one of the largest and fastest growing segments of the Information Technology industry.  The number of deployments of connected devices is forecasted to increase by 30% in 2015 from last year, according to The Gartner Group, with the total number of connected devices to reach 25 billion in 2020.

Those of us who have been involved with the High-Tech Service & Support Industry for some time will tell you that the concept of IoT and its cousin Machine to Machine (M2M) are nothing new. Remote Monitoring & Diagnostic tools have been around for decades.  As early as the mid-1980s, capital equipment manufacturers like Honeywell, Texas Instruments, and AT&T had deployed these solutions to improve the troubleshooting and maintenance of their systems.

At issue, it is only within the last couple of years that the number of IoT and M2M deployments has begun to sky-rocket.  Let’s look at some of the forces that are making this possible:

  • Social Forces: One of the reasons why I believe we are seeing a surge in connected devices within the High-Tech Service Industry is the recognition that data drives business. For service providers, it is no longer just about finding ways to reduce the time and cost associated with troubleshooting and maintenance. In order to optimize productivity and efficiency, and to facilitate innovation in a service business, you need data. While service executives have understood this for some time, end-customers now understand and appreciate that they also need access to this same data in order to optimize the operations and processes that comprise their enterprise. In essence, data about the condition of assets and machine performance is part of a larger system of systems which need to work in tandem to ensure that that the entire system works smoothly and efficiently.
  • Economic Forces: The cost of implementing IoT and M2M solutions has reduced significantly over the last decade. In the past, remote monitoring was achieved through dedicated land line data communications which were very costly to implement and maintain. Today communication is much more accessible and affordable through technologies like Internet Protocol, ZigBee, and Wireless. Furthermore, the cost of collecting data has improved significantly. Earlier solutions required expensive and clunky Programmable Logic Control (PLC) platforms. Now data collection is possible through low-cost, disposable sensors. Furthermore, the financial justification for IoT has improved. Not only is access to investment capital cheaper than ever but manufacturers are now finding ways to monetize IoT solutions resulting in a profitable revenue stream, higher ROI, and faster payback period. More importantly, the financial model associated with IoT deployments is changing. In the past, manufacturers would first attempt to sell individual customers on the benefit of adding remote monitoring to their capital equipment purchase. In turn, the customer needed to incorporate the cost of a Remote Monitoring solution into their capital expenditure and cash flow projections. The economics of IoT have now made it possible for service providers to make IoT solutions available as a subscription model, thus enabling end-customers to turn a high fixed cost investment into a variable expense.
  • Technology Forces: As noted above, the technology (e.g., data communications, sensors, etc.) associated with IoT and M2M is becoming cheaper, easier to implement, more secure, and flexible. In addition, we now have access to much more robust, cheaper, and flexible data repositories. Not only has the cost of storage improved but the advent of Big Data solutions enables us to leverage information collected by IoT in ways we have never known before.

 

For service executives who are dissatisfied with service being an afterthought in their organization, now is the time to look toward M2M and IoT as platforms for innovation and new sources of profitable revenue.    To achieve this outcome, service providers need to develop an overall service business strategy around IoT as opposed to merely a technology plan for connecting devices with back-end systems.   While addressing concerns with respect to security and risk are critical to any IoT deployment, the optimal strategy must incorporate a service centric philosophy, receive full endorsement by C-suite executives, and be formulated with active participation of the service leadership team.  Strategic design is critical to IoT success. For more information, schedule a free consultation.

How do you meet customer expectations all the time, every time?

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Time is one of the most important drivers of value within a service business. Here’s an example of why that is the case…let’s say that you decided to go out for lunch with colleagues from work and you only have 45 minutes to eat.  In this example, you have three (3) choices. You can go to restaurant A where you have a long line.  You can go to Restaurant B were you have a short line. Or you could go to Restaurant C where you have no line at all.  Which Restaurant would you go to?  I’ve asked this many times in live workshops and the participants usually say Restaurant B. Why?  More people tend to choose Restaurant B because the line is not too long or too short. The tables are turning over at a good rate and people are being seated quickly. To quote Goldie Locks, “it’s just right”.

Why not Restaurant A? The line looks like it is too long and people are not leaving very quickly.  You’ll never be able to eat lunch and get back to work on time.   Why not Restaurant C? No one is there. It looks deserted. Very suspicious! Maybe people are getting ill from the food?  Don’t know if I want to go there Restaurant B seems like the safe bet.   It’s an optimal length of time.

Customers not only notice the speed of service completion time, but the amount they pay will be in direct proportion to how long they have to wait.  The challenge is that not every customer has the same requirement for service delivery. Some require shorter length while others are willing to wait a little longer for service.  There is also is a direct correlation between service completion time and customer satisfaction. Too much service can be just as negative as too little.   Let’s say that as soon as you stepped foot into the restaurant, your server came by to take your order but you hadn’t had time to look at the menu. That’s too much service. You’d probably get annoyed and if the server continued to hover over you, chances are you’d become very dissatisfied.  Let’s look at the opposite.  You go into a restaurant, you know exactly what you want to order and need to get back to work right away but there is no server to take your order. That would lead to dissatisfaction too. Wouldn’t it?

This principle also exists for services like onsite maintenance, depot repair, and service parts logistics. If your service level agreements (SLA) specify a 4 hour response time and your Field Service Engineer arrives in 4.5 hours, you’ll have an unhappy customer on your hands.  However, if they are arrive in two (2) hours, your customer’s satisfaction level maybe no higher than if they arrived in the 4 hour timeframe guaranteed by your SLA. In fact, they might be less satisfied if the FSE arrived sooner especially if no one is available to speak to the FSE because the customer implemented a work around, and the result was the FSE had to come back another time.

As a service marketer you really have to pay close attention to the perceived value of time versus actual time and make sure you’ve defined the service level to the customer, and have the capability to deliver it. The truth is that once you understand the value of time you can weave this into your value proposition and pricing strategy.  By doing your market research, you will be able to determine if there is a segment of your market that is willing to pay a premium for faster service. However, in order to deliver faster service you most have the technology, processes, and people in place to ensure faster deliver.

As service executives, we have to continually ensure that our service delivery infrastructure is aligned with the needs of the market and vice versa. This must be done at both a tactical and strategic level.  Tactical efforts involve activities like transactional based customer satisfaction tracking studies and daily monitoring of KPIs.  Comparison of these metrics help you anticipate and resolve issues before they get out of hand.  By contrast, strategic initiatives have a longer time horizon, usually involve a capital investment, and will typically lead to a step-wise improvement in financial performance.  To achieve this outcome, a service executive will want to get a clear picture of customer requirements by commissioning a “market wants and needs” study.  He/she will probably look toward carrying out a benchmark evaluation of internal operations to ensure that the service delivery infrastructure is capable of meeting these needs. These types of analysis will also pin-point where service executives need to invest the most to achieve gains.

Just like the restaurant example given above, service executives who miss the opportunity to align internal capabilities with the needs of the market, both tactically and strategically, are likely to find customers leaving because the wait time is too long or the quality of service is questionable.  Don’t make the same mistake.  Make sure you’ve got a tactical and strategic framework in place to ensure that your service is just right.   To learn more about the concepts described in this blog post, check out my new online training course titled “Successful Service Marketing”.   Struggling to implement a tactical and strategic framework?  Feel free to schedule a free consultation to discuss how we might be able to help.

How do you know if your price is right?

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When was the last time you took a serious look at your company’s pricing strategy? I worked with a client last year who hadn’t made any significant changes to their pricing in almost 20 years.  While they made minor adjustments over the years to reflect competitive pressures, they never re-evaluated the basic assumptions and core calculations around their published price list.  They realized they might have a pricing problem when they noticed that they weren’t wining as many competitive bids. In addition, the bids they did win were not very profitable.

It might be time for your company to re-examine its pricing strategy if you find yourself in a similar situation.   Before you rush into a complete overhaul of your price book, it is important to have a clear objective of what you are trying to achieve with your pricing. Remember, pricing is a marketing function and marketing is all about perception so how you price your services will influence your outcomes in the market.  For example, your objective might be to take market share from a well-entrenched competitor.  Alternatively, it might be to avoid leaving money on the table. It might be to accelerate penetration into a new market or it might be to simply cover your costs and/or subsidize another part of your business.  It is very likely that the pricing will be different depending on which objective you choose. Once you have determined your objective you can start work on establishing your pricing strategy.   There are three (3) perspectives you need to consider when determining your optimal price.

  • Competitive Price: This is the price that your competitors charge. It is best if you can build or get access to a database on competitive pricing. This will help you understand what the highest, lowest, mean and median price points are within your market.
  • Market Perceptions: It is important that you have a good grasp of market price sensitivity.   You’ll want to understand at what point the price is perceived to be too cheap that quality is questionable, a bargain, getting expensive, or too expensive to afford. The answer will help you understand the optimal range at which you can price your services. One of the best ways to obtain this information is through survey research.
  • Your Price & Cost Structure: It is important that you consider your current cost when re-evaluating your price strategy. Obviously, you must know this if you are going to set prices high enough to cover your cost if that’s your objective. You’ll also have a better understanding of how much margin you can achieve under different price scenarios when you have this information at hand.

These perspectives provide the constraints you need to optimize your objective. For example, if your objective is to take market share from a competitor through a more aggressive price strategy, than you need to not only know where your current price is in relation to your competitor(s) but you’ll also need to know what price range the market (i.e., customers, prospects) perceives as optimal.  You may run the risk of pricing your service too low that the market perceives the price as too cheap to be of any value.  On the other hand, it may be difficult to win business by raising your price if the market already perceives your price as too expensive and your price point is already significantly higher than your closest competitor.  However, you can justify an increase if you are perceived as a bargain even if your price is higher than your closest competitor.

Hopefully, it is becoming clear to you why these perspectives are so important in establishing your pricing strategy.  Let’s get back to the client that I mentioned at the beginning of this post. I took them through a similar analysis and we were able to establish a new pricing strategy that has resulted in them winning more business at a higher margin. It was surprising to learn that they didn’t have to lower prices across the board to remain competitive. In fact, they could rationalize a price increase for some of their services and still remain competitive.

In summary, the key takeaways when it comes to  developing an optimal price strategy are 1) get clear about your desired outcome, 2) make sure you have the relevant data points you need to evaluate pricing alternatives, and 3) adopt an analytical approach. Think you might need to overhaul your pricing strategy?  Feel free to schedule a free consultation to discuss how we might be able to help.

Overcoming challenges to selling services

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Direct selling is a timely and costly proposition.   When it comes to product sales, the probability of success through direct selling is approximately 10%.   These means a salesperson would need to have a meaningful conversation with at least 10 prospects before one became a customer.   The probability of success is much lower, closer to 2%, when it comes to services.    One of the reasons is because products have a well-defined form fit and function while services do not. As a result, it is a lot easier for the prospective customer to understand how a product will enhance their life or business. In other words, they can appreciate how having the product will help change their situation.

A bigger challenge when it comes to selling services is that most people think they already have enough.  Let’s take an example a service we are all familiar with, insurance.   Has an insurance salesman ever called you asking you if you want to buy any insurance?  I would image they called you around the dinner hour and you were not that interested in speaking to them.  They probably tried to sell you more coverage, maybe with the promise of reducing your premium payments.  Unless you really needed more insurance, I bet your response was something like “I’m happy with my current insurance carrier” and/or “I don’t have time for this right now”, or “saving a few extra dollars a month isn’t worth the time and effort of taking a physical and completing the paperwork”.

Sound familiar?  You probably have little incentive to buy more insurance, especially if you believe you already have enough.   Would you be surprised if the same dynamic exists when it comes to purchasing other types of services like professional services, hardware support, or logistics, etc.?  Probably not!  I’m sure you’ve heard similar types of objections, like “we are happy with our current provider”, “we don’t see any reason to change right” now, or “its takes too much effort to change”.

Fortunately, there is a way to change this pattern and improve your chances of winning new business. It’s called “Education Based Marketing”.  It uses a number of different indirect selling tactics to create interest, build demand, and lead prospects toward taking action.  Examples of indirect selling include websites, brochures, newsletters, press releases, and article placements.

To understand how education based marketing works let’s look at the insurance example again.   Let’s say that you have reached a point in your life where you are starting to think about retirement and you are in search of an investment that protects your principle and produces a reasonable, guaranteed rate of return.  Now suppose one Sunday morning you are reading the “Lifestyle” section of your local newspaper and you see an article about retirement planning. The article describes challenges, concerns, and frustrations that people experience when it comes to investing. It also identifies various options to overcome these challenges. One of these options is insurance annuities and there is a quote from an insurance salesman, who just happens to be based in your hometown, about the types of returns that are possible with annuities and what to look for in a provider.  Now if you are planning for retirement, chances are that one of the first things you are going to do on Monday morning, after you find that salesperson’s telephone number, is call him and schedule an appointment to discuss your needs.

Compare these different approaches.  In one scenario you can’t wait to speak to the salesperson and in the other you won’t even give him the time of day.  Simply put, by using an education based marketing strategy and indirect sales tactics you pull prospects toward you rather than then pushing yourself on them. In a nutshell, education based marketing is about educating your prospects about the challenges they face and the ways they can solve them.   You still need to be able to sell once you get in front of prospective customers.  However, education based marketing helps improve your success rate because  it provides a process by which prospects self-qualify themselves and take initiative to call you.   Our research shows that prospects who engage with a company’s Education Based Marketing program are 29 times more likely to purchase and 94% more satisfied with their purchases because they are better educated about what they purchased and why they need it.  In other words, they can defend their purchase logically.

If you are responsible for marketing and selling services,then it’s absolutely critical that you give some consideration to Education Based Marketing. No doubt it will improve the effectiveness of your sales process and closing ratio.  Education Based Marketing is one of the five (5) fundamental concepts of successful service marketing that I cover in my new online training course. Last but not least, you can schedule a free telephone consultation with me if you would like to discuss how Education Based Marketing can work for your company.

Fundamental Concepts about Successful Service Marketing

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Where would we be if not for marketing?  It plays such a critical role in generating sales.  Indeed, marketing is about finding a need and turning it into a want.  For example, you may need an automobile that can transport you family to and from their activities. However, you find that you want a BMW SUV because it’s a quality car, that drives well, is safe to drive, and has a great audio system. How do you know this? Marketing!!!

Unfortunately, marketing can be a daunting task for those of us in the services industry. That’s because most of what we are taught in business school about marketing is product oriented.  Let’s face it; products are easier to market because they have a form, fit, and function. They are tangible.  Services, on the other hand are intangible. So how can you effectively market them?  Using a product approach to market a service is like trying to hammer a square peg into a round whole. It just doesn’t work.

Service marketing maybe difficult but it doesn’t have to be impossible.  To become successful at service marketing you need to understand three (3) basic strategic concepts about services:

  1. Value is based on perception: That’s right! The demand your customers have for your service and the amount of money they expect to pay is based on their perception of you. It’s your responsibility as service marketers to manage this perception through your brand and communications strategy. More importantly, their perception must be consistent with reality. Otherwise, you’ll lose your credibility. You can’t expect customers to pay a premium price for your services if the perception is that you are a low cost provider.
  2. Capability to serve versus actual service: It order to effectively market and sell services you have to give your prospective customers assurance that services will be there when needed. This means that you have to define your capability to serve before they buy and receive the service from you. Capability can be described in terms of service offerings (i.e. portfolio), processes, skills and infrastructure that make the actual service possible.
  3. Value-in-Use and Time:  Another factor that influences your customers’ willingness to purchase a specific type of service from you at a specific price is their value-in-use for that service. This is defined as the value of the service to the customer in the absence of its presence. In a service business, we often measure this in terms of time. For example, it may cost your customer hundreds of thousands of dollars if their data center hardware is down for more than 2 hours. The higher the value-in-use the more they’ll be willing to pay. Knowledge of your customers’ value-in-use provides leverage in how you price and market your services.

To summarize, it’s all about perception, time, and capability. How well do you incorporate these concepts into your portfolio design, your pricing, and your marketing communications program?  Just think about how effective you become if you do.   Let me know your thoughts.

These strategic concepts provide an underlying framework upon which all great service marketing programs are built. However, they are just the tip of the iceberg of what you need to know.  To help you succeed, I’ve created a new online course that will educate you on the fundamentals of successful service marketing. You can learn more through this link:

Successful Service Marketing ™

I encourage you to watch the brief video overview.  The course is perfect for anyone who wants to become more effective at marketing their service business.  You can also schedule a free consultation with me if you’d like to learn more.

Predictions for 2015 and their impact on Lifecycle Services – Part II

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In Part 1 – my last blog post on this subject, I discussed some of the trends that are creating uncertainty for companies who participate in the IT Service Supply Chain.  This uncertainty stems from conflicting data with respect to market drivers in the IT Industry in general and Lifecycle Services Market (e.g., hardware maintenance, asset recovery, depot repair, services logistics, etc.) specifically.

For example, more than three quarters (78%) of workloads will be processed by cloud data centers and almost a quarter (22%) by traditional data centers according to the Cisco Cloud Global Index.  In addition, public cloud and hybrid cloud will grow dramatically faster than traditional datacenters.  Most of this computing power will be housed in mega data centers.  However, IDC predicts that by 2017 industry consolidation will lead to a market comprised of only 6 to 8 mega global players.    The strategic implication is that there will be less IT assets distributed throughout the world resulting in less demand for onsite maintenance.

On the other hand, IDC predicts that IT spending on big data will grow 30% in 2015.  In addition data volumes will exceed 6 trillion terabytes.  Furthermore, data created by Internet of Things (IoT) will nearly quadruple by 2018 from 2013 creating twice the amount of data end users transmit to data centers and it will be 47 times greater than total data center traffic that exists today.  This means that there will be increased spend on data storage and network management.  As a result, services associated with the installation, management, and maintenance/ repair of storage devices and network equipment may increase.

Given these conflicting perspectives, what can companies involved in Lifecycle Services do to ensure profitable revenue growth in 2015 and beyond?   Here are six (6) things that service providers can do to achieve long term success:

  1. Have a clear understanding of your planning horizon: Remember the impact from the trends described above will not be felt immediately. They are likely to occur over a 5-10 year horizon. You need to anticipate where the market will be in the future and create a road map to get you there.
  2.  Focus on micro economic business trends: While it’s always a good idea to review market data from industry analysts, this macro level data may not reflect the actual dynamics, buying behavior, or purchasing decisions within your target market. That’s why primary market research is so important to your planning process.
  3.  Decide on where you are going to play: This requires asking critical questions about the condition of your target market today and where it is headed in the future. Will you continue to sell into a down market? Do you expand into new markets that are synergistic with your existing capabilities? Do you develop new capabilities and diversify into higher growth markets? These decisions require that you take a structured and disciplined approach to market research and strategic planning. You can no longer rely on top of the mind pontification or gut level decision making to plan for your future.
  4. Have a clear exit strategy: Regardless of your decision about your future growth, it is important to plan with an exit strategy in mind.   As a business owner or executive, you probably have good idea of the financial objectives your company needs to achieve before it exits the business. If not, you need to establish these targets right now even if your service business is a division or subsidiary of a larger company and there are no immediate plans to sell in the next 5-7 years. Exit planning will force you to consider what your business needs to look like, how it needs to operate, how it needs to go to market, what type of growth rate it needs to achieve, and how much profit it needs to generate in order to exit. The actions you take to achieve these outcomes will benefit your company whether or not it actually exists.
  5. Maintain a highly efficient infrastructure: One thing is for certain, end-customers will continue to seek operational efficiency when managing and maintaining their IT assets and related operations. It is inevitable that they will continue to place downward price pressure on their service providers. A highly efficient infrastructure and service delivery processes is an imperative for winning and keeping customers as well as maintaining healthy profit margins.
  6.  Market on all cylinders:  Your customers face these same challenges that you do when it comes to planning for the future. They are likely to be confused by all the options available to them. The way to win their hearts and minds, and share of spend in a competitive market is by positioning yourself as an expert in their market. It requires that you implement an education based marketing strategy. This approach builds trust because you demonstrate that you understand your prospective customers’ needs. When implemented effectively, it defines the criteria that your customers should consider when choosing a service provider and establishes your company as the standard by which they should consider.

Your future can be bright as long as you are prepared to do a little work to prepare for it.  It is only a problem if you do nothing at all.   One way to ensure you and your team achieve optimal success is to seek guidance from an objective, independent advisor.  With over 25 years’ experience in completing similar assignments in the High Tech Industry and extensive capabilities in key practice areas (e.g., market research, strategic planning, service marketing, and productivity & efficiency improvement), we believe that Blumberg Advisory Group possess the skills to help you succeed.  To determine if we have a solution to meet your needs visit our website or schedule a free consultation today.

Predictions for 2015 and their impact on Lifecycle Services – Part I

tech-trends

I think everyone who reads this blog will agree that the IT Industry is undergoing a major transformation as end-users deploy a greater number of technologies like Cloud Computing, Mobility, Internet of Things (IoT), and Big Data solutions.  Prognostics from IT industry analysts point to an increased roll-out and deployment of these technologies in 2015.  Although these predictions bring good news for suppliers of these technologies, they bring with them some level of uncertainty for companies that provide Lifecycle Services such as onsite maintenance, depot repair, installation services, etc.

In essence, some trends suggest that there will be greater demand for IT Lifecycle Services in the future while others point to a reduced need for these types of offerings.  For example, trends which seem to have a positive impact include:

  • Internet of Things – Companies that design, build and operate networked eco-systems in industry sectors like transportation, agriculture, etc. will turn to Lifecycle Service providers for the provision of onsite and logistical services to support these platforms.
  • Big Data – The proliferation of these solutions will require additional storage which in turn will bring the need for installation and maintenance services.
  • Hybrid Cloud – Lifecycle Services are needed to support hardware refreshes and maintenance of on-premise technologies like networking equipment, storage, servers, etc.
  • Video – The use of video among consumers and enterprise is increasing and the roll-out of technologies which support this type of communication is increasing. As such, companies who deploy these solutions will continue to turn to Lifecycle Service providers for support.

The trends that could reduce the demand for Lifecycle Services include:

  • Data Center Consolidation & Virtualization – Although onsite service providers are needed to deploy these types of solutions, consolidation and virtualization means that there is less hardware to be supported in the field.
  • Pre-fabricated Data Centers – In their desire to operate efficiently, those companies that operate and maintain their own data centers will turn to pre-fabricated models which reduce the level of labor and material used in the design, build, and installation of new data center.
  • Software Defined Networks (SDN) – The transition to SDN means that network operators can build-out or enhance their networks without investing in new hardware. As a result, the need for Lifecycle Services may plateau.
  • Preference toward Public Cloud – According to the consulting firm 2nd Watch, private cloud computing is one of the least popular trends right now because it is very expensive to manage. As result, a large percentage of CIOs are opting for public cloud solutions. These will result in the reduction of end-user IT assets to be supported by Lifecycle Service providers.
  • Mobility – As enterprises continue to deploy mobile device in their workforce, we will see less and less demand for fixed IT assets like desktop computers and departmental servers along with the lifecycle services that are associated with them.

While this analysis of market trends is by no-means exhaustive, it does suggest that the market for onsite and depot repair services will remain volatile over the next several years.  This is because end-customers are in various stages of their lifecycle when it comes to the implementation of disruptive technologies.  As such, some end-customers will require more support from their lifecycle service provider while others will require less.  No doubt, end-customers will continue to seek the most cost effective provider when it comes to supporting their lifecycle service requirements.

To win in this new market, service providers must possess good market intelligence on what stage of the IT lifecycle their customers are in.  At the same time, service providers must use this information to develop and implement service offerings, delivery processes, and infrastructures that are optimized towards the needs of their target market.

In my next blog post, I will reveal in more detail the steps that Lifecycle Service providers can take to thrive under the new market realities described above.  In the meantime, please feel free to schedule a free consultation with me if you would like to get a jump start on preparing your company for future growth.