Make Way for a New Marketing Power:

Service Marketing

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In this week’s blog post, I am sharing an article that first appeared in Field Service Digital on July 15, 2016.  The article was written by Derek Korte, editor at Field Service Digital and a senior editor at Original9 Media.  

Thanks to technologies like the IoT, and enticed by the promise of more revenue and a cozier relationship with customers, traditional manufacturers are now getting in on the service game. It’s a shift that not only blurs the lines between manufacturing and service, but also how companies market those products and services.

Sure, tried-and-true product marketing strategies are still relevant, but service marketing is a different beast entirely, says Michael Blumberg, president of the Blumberg Advisory Group. Below, he explains service marketing’s growing importance — and why it’s so hard to do well.

Is service marketing now more important than product marketing?

It’s not that product marketing is less important, it’s that service marketing is becoming more important. There are several reasons why: First, many companies have made it a strategic priority to build and grow their service businesses. Second, they recognize that services can be sold independently from products and, in some cases, in lieu of products. Third, they recognize that service marketing is different from product marketing and a different approach is need. Fourth, they understand they have to step up their marketing game if they are going to generate more service business.

So products might sell themselves, but that’s not necessarily true with services?

That’s true. You can sell a product by showing the customer the great things it can do because it has cool features, such as the IoT and augmented reality. On the other hand, service is intangible.

There is nothing you can show or demonstrate to the customer before they buy it. Just because a product has certain features, doesn’t necessarily mean that they will buy the service and support that comes with it. This is different sale all together.

How do you convince customers to invest in an unfamiliar service — especially if they don’t immediately know why they need it?

You have to focus on the economic value to the customers of having (or not having) the service available when they need. When you understand that, you can start selling services around that value proposition. Companies that struggle with service marketing can’t explain this benefit to the customer. Instead, they talk about service as an insurance contract. That’s a very general term. It doesn’t tell them anything about how the service will be provided, when it will be provided, or what outcomes it will produce.

What are the biggest differences companies should consider when marketing services, rather than products?

In a product sale, you sell the customers on the form, fit, and function of the product:. You basically sell them reality: what it does, how it works, its dimensions, etc. When selling services, you also have to sell customers on perception: the outcome or defined level of service they can expect. Bear in mind, you also have to sell reality, which is also known as the actual capability to serve, by describing or showing all resources that make it possible to deliver that level of service.

Is it fair to say service marketing is a lot harder — and a lot more work — than product marketing?

It’s a lot harder for a couple of reasons. First, service is an afterthought for many companies. They think that because the customer owns the product, they’ll buy the services, too. That’s often not the case.

Secondly, you can’t market a service like you would a product. Marketers talk about the four principles or Ps of marketing — product, place, promotion and price. But those principles are product-oriented. They don’t work with services marketing. Why? Services are intangible, and it’s hard to market something that’s intangible. To market services, companies need a new mix — the Seven Principles.

Are new technologies changing how companies market their services?

Service technologies like IoT, Big Data, and even field service software enable companies to collect and analyze very granular data about service events, product usage, failure rates, etc.

This information enables them to offer very tailored and customized solutions to their customers in terms of service coverage, response time, pricing levels, etc. The technology also helps companies be more precise about who they market to, when they market to them, and what they market.

Any standout companies that are doing this well?

Siemens, GE, and Philips are doing a pretty good job in marketing their service. They’ve made service marketing a priority because they understand services’ strategic value to their bottom line. They have carefully designed their service portfolios and pricing strategies to meet customer needs and requirements.

Their service marketing and sales people are adept at articulating the economic value of their services, and they are properly trained and incentivized to sell those services. They are effectively leveraging technology to find new market opportunities and exploit existing ones.

Are you interested in growing your service business? Check out my online training course where you will learn 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.

Got a question? Click here to schedule a free consultation

Turbocharge Your Service Business

Maximize Revenue through Market Research

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In my last series of blog posts I wrote about what it takes to build a Successful Service Marketing™ program.  To review, I described the strategic concepts of service marketing and introduced you to the 7 Ps. These are of course very important concepts. However, there are a few more concepts you’ll need to master if you are going to win at service marketing. If you’re going to be successful at service marketing or any kind of marketing, even if it is product marketing, you have to have good knowledge of your market.  You get that knowledge through market research. If you know who buys, what they buy, and why they buy then you can sell more to them and get them to buy more often.

Market research also provides the insight needed to communicate effectively with your current and prospective customers. It helps determine what messages, what images, what ideas will resonate with them and get their interest to want to buy from you.  Marketing is about taking a need and converting it into a want. You may need a watch to tell time but you want a Rolex because of the status and prestige associated with owning one.  So when you have really good market research of who buys, what they buy and why buy, then you can construct your message in such a way that you turn a need to a want.   In the field service world, you customers may need to know that they can get service on their equipment when it is down but what they really want is a guaranteed Service Level Agreement with a 4-hour response time.

Good market research not only helps in creating a service portfolio your customers really want but it helps in developing an optimal pricing strategy for that portfolio.  Chances are that you are familiar with cost plus and competitive pricing strategies. With cost plus pricing, you calculate what it costs to deliver service and then mark it up by an amount to cover you profit.  With competitive pricing strategies, you conduct market research to find out what your competitors are charging and then price your services at a lower amount.

A third type of pricing strategy is called value-in-use pricing. It basically involves measuring the economic value or loss to the customer of not having the service available in a timely manner.  This can be significant.  For example, a manufacturing facility may lose millions of dollars every hour its machines are down.  Therefore, they may be willing to a pay premium for faster service.  Market research can help you understand your customers’ value-in-use and determine whether or not you should pursue a cost plus, competitive, or value-in-use pricing strategy.   You’ll need to understand all three pricing strategies and how to effectively leverage market research to maximize service revenue and optimize profits.

The final aspect that you have to master to win service marketing is called ‘‘Invisible Selling”. This is based on the premise that you win business not by pushing your offers onto prospects, but by pulling customers towards you. One of the ways you pull customers to you is through indirect marketing as opposed to direct selling.  What’s an example of indirect marketing?  It’s an article or white paper that demonstrates that your company understands the problems that companies in your market are experiencing and that you have solutions to these problems.  It’s about using social media and public speaking opportunities to influence others to want have a conversation with you to learn more about what you do, and how you can help them.   It’s about positioning you and your company as experts and trusted business partners.   By the way, seeding your thought-leadership content with market-research data is a sure-fire way to build credibility with current and prospective customers.  Once you establish credibility they follow you and then it’s only a matter of time until they become your customers.

When you put all the elements of a Successful Service Marketing™  program together, when you fully understand the strategic concepts of service marketing, when you effectively apply the seven principles of service marketing, when you learn how to optimally price your services, when you use market research effectively, and implement an invisible selling strategy, you’re going to experience incredible results.  Your marketing program will be extremely successful, your sales will take off, and your business will skyrocket.

If you are really interested in achieving extraordinary results, then check out my online training course where you will learn 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

Got a question? Click to schedule  a consultation.

Strategic Concepts that Fuel Revenue Growth

The Basics of Service Marketing Theory

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It probably comes as no surprise that service executives are often focused on finding ways to increase top line revenue, boost profits, and expand market share. Indeed, these are usually among the most important initiatives that service executives pursue when it comes to charting the future of their business.

In order to achieve results, service executives need to master three fundamental or strategic concepts about service marketing.  It is important to understand these strategic concepts because they form the underling theory of service marketing, and – as you will read below – theory is what forms the basis of our reality.  By understanding service marketing theory, you can shift your perspective from product marketing to service marketing. Without this shift you can never expect to implement a Successful Service Marketing™ strategy.

One of the most critical strategic concepts of service marketing is that perception is just as important as reality.  Ultimately, the perception that a customer has about a service provider is what influences their decision to work with that service provider.  In other words, customers buy both perception and reality.  As a service provider, you must influence their perception of your capabilities.  Customers need to trust that you have the capacity to deliver service before you actually deliver it.  It’s not just the actual service that they are buying that creates value; it’s your ability to manage their perception that creates value.  Perception is what sells; your performance is what keeps them coming back.  Reality must equal perception otherwise you will have an unhappy customer on your hands.

A second strategic concept that service marketers need to understand is that customers pay more for services over the lifetime of a product than they do when purchasing the product itself.  In fact, they may pay as much as 8-10 times more for services than what they originally pay for the product. This may seem like an absurd statement at first glance. However, consider the fact that the customer may own or operate a piece of equipment for five to ten years or more.  Over that period of time they may require a broad spectrum of services ranging from installations, to remote support, to field service, to replacement parts, to training, and so on.  Clearly the dollars can add up over time.

The third concept has to do with understanding the relationship between “value in use” and time.  Value in use is about understanding the cost to your customer in absence of the service.  This is typically a function of time. Some services are mission critical.  If they are not performed in a timely manner, the customer may lose a lot of money by not having the service available.  You need to understand value in use in order to effectively price your services and articulate the value of what you can provide.  Most services are valued in terms of time. That’s because downtime equals money lost in the service world. The longer it takes to obtain service, the more costly it becomes for the customer.  The quicker the service is performed, the more valuable it is to the customer.  By understanding your customers’ wants from the standpoint of time, you can develop service offerings that meet these needs.  Furthermore, if you can meet the strictest of time requirements, than you can command a premium price for your service particularly if it is on a mission-critical product or application.

By mastering these strategic concepts you will begin to observe a shift in the way you think about service marketing.  This shift will help you become more effective in implementing marketing strategies that lead to higher revenues, greater profits, and increased profit share.  If you are really interested in achieving these outcomes, then check out my online training course where you will learn 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.

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, kindly share it with them.

Is it time for a mid-course correction?

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The summer is here and with it brings the beginning of the second half of the year. This is great time for re-evaluating progress in meeting our business goals.  It represents a half-way point to determine if we are on track for the year, if we need to change course in direction, or simply act with greater resolve and urgency to achieve our outcomes.

One thing that we uncovered in our recent Readership Survey is that a large percentage (47.7%) of subscribers desire to learn about strategies for achieving better results. The most frequently occurring response when respondents were asked about what they want to achieve in their business over the next 3-5 years in “growth”.  I think that it is safe to say that many of our readers can benefit from strategies that will help them achieve higher levels of growth.

In my attempt to provide readers with more of what they want, let me give you some action steps to follow if you find that your actual growth for this year is not in line with your original target.   First, remember that the trend is your friend.  This means that you need to periodically evaluate your market to determine if the trend is working in your favor.   You’ll want to get a handle on the size and growth rate of the market you serve, the level of competition, industry dynamics, buyer behavior, and purchasing criteria.   You can uncover this information through internet research, market surveys, analysts, and other secondary sources of data such as articles, press releases, annual reports, etc.

Assuming you’ve concluded that the market you serve is large and growing, then you need to ensure you have the right marketing strategy in place to capture your share of this opportunity.  Think of your marketing strategy in terms of a triad.

market strategy triadAt the base of this triad is your company’s performance.  The ability of your company to deliver on its promise is critical to keeping customers. If they are happy with your service, they will tell others and you will gain word of mouth referrals.  The second side of the triad is the value your company provides to customers. Is it defined in a way that the value is clear and compelling to current and potential customers?  Value is often defined by the quality of your offering and the little things you do to win over the customer.  For example, are you providing them with options so they get exactly what they want?  It also includes offering great service and support before they buy.

The third side of the marketing strategy triad is your tactics.  You want to make sure that you are implementing tactics that will drive customers to you and encourage them to do business with you.  Tactics to consider are pricing, social media, advertising, promotion, etc.  Most importantly, the tactics you use must be consistent with the other elements of your triad.  In other words, your advertising and pricing tactics must align with the value you provide and the performance you deliver, and vice versa.

This triad provides a good framework for evaluating the results of your marketing efforts. Like most frameworks, they are only effective if use them as an analytical tool.  If sales are not where you want them to be then look at your marketing strategy triad. Use it to evaluate how effective your performance, value, and tactics are in attracting and keeping customers.  It will provide you with insights on how and where to improve.  If used consistently, it will enable to you win more than you fair share of business.

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.

Seven Ways to Win at Service Marketing

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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:

  1. 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.
  2. 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.
  3. 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.
  4. 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. 
  5. 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. 
  6. 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? 
  7. 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.

Strategic Value Drivers of High-Tech Service

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In order for a business to succeed it must have a clearly defined strategic value that it provides to shareholders, stakeholders (e.g., customers, suppliers, employees,) and the market place at large.  It is important to clearly define strategic value since it is the precursor to developing a value proposition and mission statement.  Furthermore, it forms the basis for the strategies, tactics, and programs that a business puts into place.

Nowhere is strategic value more important than in the High-Tech Service Industry.  All too often, service providers, especially those that are divisions of product companies (e.g., OEMs, VARs, Distributors) fail to clearly define their strategic value.  As a result, they fail to make any impact in reaching their business goals and objectives.   They are like a ship on an ocean without a sail, drifting aimlessly in whatever direction the winds blow.

We have found that there are at least three (3) common strategic values that High Tech  Service  & Support organization might chose to pursue/adopt. These include:

  1. Directly influencing the sale and adding value – A company who adopts this strategic value recognizes that service is very critical to the customer in their final selection to purchase a product.   In other words, it’s a value-added feature influencing the purchase decision. Dell is a great example of a company who uses service as a way of directly influencing the sale of products.
  2. Generating revenue and profits directly – This applies to any company that operates their service business as a profit center or strategic line of business. These companies recognize that customers are willing to pay for service independently from purchasing equipment. More importantly, their willingness to pay is based on the value-in-use of the service not it terms of the perceived cost. Much of IBM’s success in the 1990s was due to their ability to generate revenue and profits from directly selling services.
  3. Providing market control – Companies who embrace this value driver provide a broad array of services in order to gain account control. In essence, they engulf their customers with an extensive portfolio of basic and value added services in attempt to establish a trusted advisor position and influence future sales. GE is a prime example of a company that has achieved this result by offering its customers technology assessments, strategic planning, and other types of professional and value added services.

 

When establishing your strategic value it is important to select one and only one value driver.  Otherwise, it will lead to inconsistent performance and confusion in the market place. Strategic value cannot be defined in a vacuum, it must take into account the needs and requirements of your key stakeholders and align with your overall corporate strategy. For example, a company focused on generating services revenues and profits directly may find this goal at odds with its objective to increase market share in its product market.  Basically, the service division would be competing with the products line of business for resources and investments.   More importantly, your definition of strategic value will determine where you focus in terms of Key Performance Indicators (KPIs), such as investment considerations, business constraints you must optimize, and possible market outcomes.

Strategic value when set into motion is difficult to alter since your entire service program and corporate objectives are based on this.  It often takes a commitment from the C-suite and/or board of directors as well as persistent and consistent follow through from management to successfully redefine your strategic value in terms of measurable outcomes.   This change should not be pursued lightly.  Those who succeed at redefining their strategic value often do so after very serious consideration, typically involving strategic market analysis, risk assessment, and scenario planning.

Strategic value is the DNA of your service business. If defined poorly, your strategic value maybe a liability and bankrupt your company.  If designed optimally and implemented effectively it can lead to unlimited upside potential.

Strategic Market Analysis – The Foundation for Smarter Business Decisions

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Strategic market analysis is the solid foundation from which to build your business intelligence. Having careful, objective and professional analysis of the market place, competition, internal resources and capabilities and assessing future trends built on hard data and evidence is paramount.

All Companies have a critical need for strategic market analysis. Strategic market analysis provides an understanding of the market in which you are competing. Here are a few of the questions where you can achieve insights:

  1. What’s the total market opportunity?
  2. What is our current market share?
  3. Who are our main competitors?
  4. Is this a market we should be investing in or planning to exit?
  5. Should we consider merging, acquiring or selling?
  6. What market trends can we take advantage of, or do we need to address to grow?
  7. Does our business plan reflect market wants?
  8. Are there market niches we are missing, or should be growing?
  9. What are the market segments that are growing, or declining?
  10. Are we missing any important market segment opportunities?
  11. Do we have a deep understanding of our competitors which will allow us to exploit their weaknesses?

 

Planning and Allocating Market Analysis Resources
Planning and allocating resources for strategic market analysis is essential whether your needs are for proprietary or off-the-shelf research. The value proposition in making a sound purchase decision should come down to the strategic value of the information vs. the cost. When trying to make decisions, the place to start is with the most accurate and up-to-date information you can get . Outdated or bad information will result in a cascading effect of bad decisions. Because of this, allocating sufficient resources for strategic market analysis and business intelligence is absolutely necessary. These costs are insignificant compared to the capital, assets, and business failure you risk by making bad decisions based on flawed or obsolete data.

One note of caution, you should be of aware is that lower cost off-the-shelf research when not used for its intended purpose of broad view and general trend information will in the end cost more than proprietary research.

Proprietary Research or Off-the-Shelf Research
The important key to whether proprietary custom or off-the-shelf research is best for you depends. It depends upon answers to questions like these:

  1. Why do you need the data?
  2. Are you simply in need of broad trend data?
  3. Do you need it to plan and allocate operational resources?
  4. Do you need specific information on sub-segments of the market?
  5. Is having a deep dive on the competition required?
  6. Will you need data to enhance buying & decision making processes?
  7. Do you need strategic and market analysis?

 

Bottom line proprietary market research is the choice for comprehensive and specific information that allows you to make informed operational and tactical decisions. Also when you need more data points like:

  1. Market size and forecasts by product or region
  2. Deep dive competitive information
  3. Understanding market behavior, needs and wants
  4. Analyzing your capabilities to deliver against market needs
  5. The help of a market expert to leverage industry data from a proprietary databases

 

Off-the-Shelf market research is best for a broad view of the market without a lot of specifics. This type of market research attempts to satisfy the needs of most people wanting to gain a high level view of a market or industry.

When off-the-shelf or Internet research is used as the method for obtaining market data it is often referred to as a “Swiss cheese” approach. However, the problem, as we know with Swiss cheese, is that it has holes in it. This method is fraught with issues like:

  1. quality of the data
  2. old data, freshness of the data
  3. not getting the whole picture
  4. comparing apples to oranges

 

This approach is like trying to build a jig saw puzzle with pieces from different puzzles. Is this what you want as the foundation for your decision making?

Take Away

No matter the type of market research, the important point to remember is that no successful business goes to market without all the market research it can obtain and continues to utilize market research on a consistent basis to remain successful.

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.

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.