Tag: #conversion

How to Use Service Marketing to Grow Service Revenue

Over the last five to ten years, a growing number of Chief Service Officers (CSOs) have been assigned a service revenue growth target—a trend recently confirmed through research by Noventum, which found that more than 85% of product manufacturers have set a growth target for their service function. As this trend gains steam, we think it’s worth examining how CSOs can achieve service revenue growth and what they can learn from the sales side.

If you ask a salesperson to grow revenue, they will ask for two prerequisites:

  • More and newer products with more features at a better price point
  • A marketing budget to target the addressable market

What does a CSO ask for when receiving and accepting a service revenue growth target? For many CSO’s, growing service revenue and using service marketing is unchartered territory.

What’s your marketing budget?

Up to 2012, I managed my service operations at Bosch as a cost center. At that time service was the single largest margin contributor to the company. In 2012, I received service revenue growth objectives. Simultaneously my role transitioned from the service domain to the sales domain. In my first conversation with the chief revenue officer, I was asked: “What marketing budget do you need?”

Having run service operations for 25 years, my automatic response was to first focus on achieving excellence for the existing service delivery capabilities. After a crash course in sales and marketing, I revised my strategy. Sell first. Secure the revenue. Use the revenue to finance the maturing of your delivery capabilities.

The result: a quadrupling of service revenue in five years. How? By focusing on two items:

  1. Using the voice of the customer to develop a services portfolio
  2. Setting up service marketing for the installed base

Developing a services portfolio

Back in 2012, I was so focused on service delivery, it never crossed my mind to challenge my services portfolio. My sales colleagues explained to me that a portfolio with sufficient choice is the basis for revenue generation. We then set on a course to create a services portfolio with selectable features and differing price points. Our goal was to create an “a la carte” menu card.

The true test was to come. Would our customers buy the items from our menu card? This is where we realized our need for a true marketing function. A function to help us frame the value messaging and to reach out to the target audience.

Setting up service marketing

First, we looked at the value promise our company made to its customers. Is that value promise pertaining to owning the product and/or is it about using the product throughout its lifecycle? How does our menu card of lifecycle services fit in? And how do we facilitate product owners in making the right service lifecycle choices?

In setting up a marketing function for service, we used our sales colleagues as reference. In the world of sales, key metrics are Total Addressable Market (TAM) and Market Share. Marketing uses these two parameters to spearhead campaigns. In the world of service, these two metrics can be substituted by Installed Base penetration and Attach Rates.

Total addressable market

Suppose you have installed base visibility of 100% and all those units have an attached service contract. Suppose all those contracts are of the type gold-service. The sum of that equation is your maximum achievable service revenue. You could label this as your service-TAM. If your organization also services units of competing brands, the service-TAM will be bigger.

Market share

Your current actual service revenue is the compound result of two factors – your ability to drive installed base visibility and attach rates, in combination with the attractiveness of your services portfolio.

The gap

As mentioned in an earlier blog Mind the Gap, the delta between your service-TAM and your actual market share is your revenue gap. This gap encompasses your target audience for service marketing. The larger the gap, the bigger your compelling reason to review your services portfolio and to establish a service marketing function.

Targeting your audience

Service marketing has one big advantage over sales marketing: with a field service management system focused on asset-centric business models, marketing will have the perfect data set to drive targeted campaigns:

  • Knowing where your installed base is
  • Knowing the state of the asset and how the asset is being used
  • Having a record of the maintenance history
  • Knowing what engineering change orders and modernizations have been implemented
  • Visibility to the current service contract and entitlements

As one of our customers told us:

“We operated a model of sell and forget. Now we sell and service. We have invested in installed base visibility, attach rates, our services portfolio and service marketing. We are now on a deliberate and conscious path of service revenue growth.”

Setting a budget

Knowing what I know now, I would respond differently to my former chief revenue officer. I would request a service marketing budget to revisit my services portfolio and to initiate targeted marketing on my revenue gap.

I would not hesitate to commit to service revenue growth targets, knowing the service delivery organization had an asset-centric field service management system.

This article is published in ServiceMax Field Service Digital on August 25th, 2021

Developing Engineering Change Strategies for CX and Customer Engagement

Each time when you launch an engineering change (EC) campaign you’ll have to balance brand image, quality and cost. In my previous blog 3 Steps to Make Engineering Change Management Easier (FSD, March 2nd, 2021), I added two additional business drivers: customer engagement and upsell revenue. I promised to elaborate on EC strategies, on how to use the EC touch points to further your business objectives.

But first I want to say thanks to a reader who helped me frame the two different emotions associated with an engineering change: the ‘positive’ and the ‘negative’ engineering change.

  • Negative: the EC is triggered by a quality issue or a complaint.
  • Positive: the EC improves the specifications/ capabilities of the original product.

Does the emotion matter? Yes, it does and maybe it shouldn’t matter that much. Let me explain.

When the negative emotion is associated with cost and a perceived reduction of CX & brand value, its mitigation is deemed operational. Getting your act together. When using the EC as an instrument to exceed expectations, the positive emotion will trigger growth driven stakeholders to jump on the bandwagon. With a comprehensive EC strategy, you can nudge the negative to the positive side too.

“There’s no such thing as bad publicity” – P.T. Barnum (1810 – 1891) 

Creating a plan

Creating an engineering change strategy is a subset of product life cycle management. During the operational life cycle of a product many things can happen. Some of these occurrences are pre-conceived and/or planned. Some will happen ‘as you go’. Simply because it is nearly impossible to predict how a product will behave in each and individual use context.

Creating a plan is like preparing for the unknown. The good news is that the unknown can be moulded into a limited number of buckets:

  • The product does not deliver on its as-sold and nominal attributes
  • The product is used in a context beyond its nominal attributes
  • New product capabilities enhance the nominal specifications

For each of the three buckets you can create a communication channel with your installed base and define a follow-up workflow. As a potential response to each of the three buckets:

  • Document and investigate the gap, provide a product fix … or change the expectation.
  • Investigate the use context of the product and re-evaluate the product specifications. Advise on product replacement or product upgrade possibilities.
  • Filter the installed base on those customers that will perceive the enhanced specifications as a value add.

Each of these workflows impacts cost, revenue and CSAT. Most of all, you build a communication relationship with your installed base, managing customer experience over the life cycle … and beyond. Just imagine your EC strategy becoming the proactive/ predictive instrument to avoid unplanned downtime.

What does your customer buy and expect?

Words like strategy and lifecycle imply a longer timeframe. This requires us to revisit the original value promise made at point of sale. Is that promise a one-off or a longer-term commitment? The answer will impact your EC strategy.

If the sales value promise is a one-off, the customer buys the product as-is with an optional limited warranty. Because warranty is an integral part of the product sale, we need to define both coverage and period. Also, we must be mindful of expectations and regulations.

  • In Japan the phrase “Quality is included” drives EC and lifecycle services to high expectations with ample opportunities to monetise them.
  • In Germany the warranty construct is decomposed in two definitions “Gewährleistung” and “Garantie”. The former relates to a defect and/or violation of regulations, the latter is a voluntary value promise.
  • When you buy a product from a AAA-brand you’ll likely have a different lifecycle support expectation over a B-brand.

With the above components it becomes clear that you’ll need a product lifecycle vision with an EC strategy spinoff.

A steady flow of engineering changes waiting for a framework

Now, let’s expand the horizon beyond the warranty period. Your customer may have bought a product. What your customer needs is the output and outcome of that product, preferably over a longer period of time. Over that time entropy and technology advancement are the biggest drivers for engineering changes. 

Knowing you’ll have a steady flow of ECs you’ll need a framework to manage them. Even more so when we’ve learnt in the previous blog that ECs often occur in an environment of constraints. You’ll need to make choices of who gets scarcity first, knowing this will impact cost, revenue and CSAT. 

Scarcity is a multi-facetted ‘beast’. It can work both for and against you. Thus, one more reason to put a lot of thought into defining an EC strategy.

“There is only one thing in the world worse than being talked about, and that is not being talked about.” – Oscar Wilde

Every touch point is an opportunity

In the world of sales and engagement the mantra is: every touch point is an opportunity. Throughout the operational life cycle of a product there are many touch points. When you can explain entropy and technology advancement in its use context, when you have a compelling engineering change strategy and when you can embed that EC strategy in your service portfolio, then you’ll get the level of engagement and life cycle partnership you seek. Driving cost, revenue and CSAT to both party’s satisfaction.

This article is published in ServiceMax Field Service Digital on May 4th, 2021

Sales and Service working in Collaboration

“Which function in your organisation has the most touch points and the highest customer trust?”. Here I go again, preaching to the choir. You know where this line of thought is going. Today I want to voice a different tune. I don’t want to highlight what sets Sales and Service apart, but I want to find the common ground. Because we need each other for the sake of organisational survival and growth.

The Ugly Truth

A couple of years back I chaired the Copperberg After:Market event. In my closing remarks I provoked the audience with the word “after” in “after-sales”. Is service an afterthought? A big NO came from the delegates. Though the word “after” triggers quite some emotions and hits some nerves, let me share an ugly truth with you: after-sales does not exist without an initial sale! Service will not replace sales. Service should not compete with sales over margin contribution. Both sales and service have a role to play in customer value creation throughout the life cycle of a product. The product becomes the carrier of value creation.

Contributing Centre

So, I’m not going to ask you to raise your hands by asking if your service organisation is either a cost-centre or a profit-centre. We now agree that you are a contributing centre! Agreeing on this nomenclature is key to collaboration with sales for two reasons:

  1. In a head-to-head battle with sales, sales will claim ownership of the revenue play. You don’t want this. You want a joint role and responsibility in revenue generation and margin contribution.
  2. More conceptual, if Service were a true profit centre, Service would have had the organisational and budgetary mandate to sustain and grow service revenue. Practically all CSO’s I’ve met have a budgetary mandate up to 2,500 dollar, pound or euro. That’s not enough to drive your own margin and revenue destiny. So, maybe it is better to have Sales co-funding your new Service tools. In return you share your customer trust and high quality touch points with Sales.

Handshake

This handshake, this collaboration between Service and Sales can be explained using the technique of Causal Loop Diagrams[1](CLD).

At last year’s Maximize we did a Technician survey and asked what motivates them. In short, most technicians want to be a hero on site. With that status they create customer trust. As a result, they get high quality and contextual feedback.

What happens when technicians can’t share that information, or get a feeling that their insights are not actioned? No, this is not a rhetorical question. Ah, your organisation has an incentive scheme to encourage technicians to create leads. Does it work? Do salespeople take leads from the service domain seriously? Do service people know how to deliver leads on a silver platter?

Yes, technician insights have the potential to create more and better leads. The service domain is also a repository of information to develop new services. Services that include the voice of the customer. Services aligned with your customers use cases.

As a salesperson you would make a great impression on your customer when you display your ability to listen. That you proactively use the feedback shared with the technician. Not only will your propositions be better, also your customer will feel genuine interest and attention.

The killer feature in this Causal Loop Diagram is the reinforcement towards the technician. A reinforcement that outweighs any financial incentive scheme you can devise. Imagine how the technician feels when he/ she gets feedback that his/her discovery and insights have made a difference. A feedback coming from two directions. Firstly, the salesperson who confirms the use of the feedback. Secondly, the customer confirming that their previous conversation was actioned.

Closing the loop adds to the technician’s empowerment and his/ her increase in hero status. Guess what, next cycle this technician and salesperson will even contribute more to your bottom line.

A Groundhog Day experience

Does it really work this way? In 2016 we trialled this causal loop with more than 60 chief service officers. The results were published in Field Service News in a piece called Demand generation: A Groundhog day experience. Do share with us what your experiences are. Happy & collaborative hunting.

[1] Business Dynamics, systems thinking and modeling for a complex world, John D. Sterman, McGraw Hill 2000

This article is published in ServiceMax Field Service Digital on January 26th, 2021

Demand generation: A Groundhog day experience

The profit contribution of services compared to product profits has been the subject of many workshops over the past decade. Still, achieving a true shift in sales focus is a “Groundhog day” experience writes Coen Jeukens, Service Contract Manager, Bosch Security Systems

At the Copperberg April 2016 UK Field Service Summit service industry experts had their own groundhog day experience when discussing the “Demand generation” topic: what can the service manager do to go beyond the daily break-fix mode towards cross and upselling.

In five consecutive rounds the same discussion was reiterated varying the contributing industry experts. The individual rounds revolved around common convictions like:

  • Should we dilute customer trust created by service engineers with potential alienation when stepping into a commercial role;
  • Service is about helping customers, not selling to customers;
  • Service and sales have different counter parts and decision making units;
  • What is a meaningful incentive for service people to spot sales revenue and vice versa;
  • Service and sales people have different DNA.

When looking at the discussions at an aggregate level, demand generation is possible when taking the following recommendations to heart:

  • Use service engineer more as a brand ambassador than sales-lite;
  • Empower service engineer to become a hero on site;
  • Incentivise customer feedback instead of monetizing prospects/ leads;
  • Feed customer feedback into marketing function;
  • Creation of a “product” development function for services;
  • As service manager, do not boast yourself as being a profit centre, but emphasise your contributing role in co-creation with sales.

The service engineer as brand ambassador

Comparing the amount of customer touch points and level of client trust, service engineers do have an edge over sales representatives. Though it sounds tempting to dual use service engineers as sales-lite, don’t do it.

Engineers gain their stature through technical competence and stamina to prolong the operational performance of a piece of equipment. As such the engineer is the perfect ambassador for brand loyalty.

Engineers gain their stature through technical competence and stamina to prolong the operational performance of a piece of equipment. As such the engineer is the perfect ambassador for brand loyalty.

In analogy with politics, the ambassador is an important player in a multi-faceted sales game: the ambassador provides intelligence, sales translates intel into leads and deals, while fencing the ambassador’s neutrality.

When contemplating to add a sales role to service engineers, do balance the risk and reward. Bear in mind that from a decision-making unit (DMU) perspective the service engineers’ counterpart is the end user and not the asset owner/ buyer. At best the end user will decide on OPEX matters.

When it comes to CAPEX the end users’ role diminishes to that of influencer.

Hero on site

Other reasons not to mingle sales and service objectives are the differences in DNA and aspirations. A sales representative strives to become trusted business advisor in order to generate long-term revenues.

A service engineer by default has a long-term relationship, a high level of trust and an advisory role. The service engineer wants to be the hero on site, he wants to be able to help.

As a hero on site and brand ambassador, the service engineer can use his stature to open doors and generate leads on two levels:

  • OPEX leads: consumables and wear & tear components
  • CAPEX leads: generate demand for new offerings

Empowerment is the key on both levels:

  • OPEX leads: It is easy for a service engineer to convince an end- user to buy small maintenance related components. It makes him a hero if he can supply and install them right away. Any “delay” in conversion of lead into sales not only deteriorates the sales momentum, it also affects the hero status of the engineer.
  • CAPEX leads: In his default mode, the service engineer will try to fix the existing equipment compared to suggesting a replacement or new buy. When hinting towards the latter, the service engineer puts his hero status at risk because the conversion of the lead into a sale falls outside his control. Nothing is more deadly for a hero than raising an expectation he can’t deliver.

Incentivise customer feedback

Frequent customer touch points and a high level of trust put your service engineer in a unique position to be the eyes and ears of your organisation. Capitalising on that position requires a multi-tired approach.

In analogy with the concepts of “big data”, capturing the sensory output of the service engineer is step one. The interpretation of that data into a lead is step two. The conversion into a sale is step three.

When the collection of data is driven by an intended use for sales, you may not only miss out on many subtleties of customer feedback, but also bias the observation with short-term gains.

Apart from asking your service engineer to collect specific data that is not in his DNA, you may also risk the neutrality of your ambassador/ hero.Ideally you may incentivise your service engineers to collect customer intelligence and feedback regardless of its conversion into sales.

Feed marketing

Information collected by service engineers is a valuable addition to the data input of your marketing function. Once in your marketing process it augments existing data and will result in better quality leads.

Better leads are more prone to be picked up by sales. Follow up by sales will make the service engineer feel taken seriously.

Not only will this boast his hero on site stature, he will also use his trust with the customer to make him decide positively on the sale.

Knowing service engineers have access to high quality and individual customer intelligence, using that information may also inspire you to rethink the workings of marketing.

Markets are less homogeneous than a decade ago. New technologies and the growing importance of customer experience will even further individualise customer behaviour.

Services development function

Acknowledging declining profit margins and fierce competition on products, transitioning to a more customer/ services centric earnings model is the logical way to go. The customer intelligence and feedback from your ambassadors and heroes will become vital in understanding his needs.

Where your products development department can tell you everything about your products and their roadmap, any service engineer can tell you how your customers use those products and how customers experience their use.

The combination of product and its use open up new sales opportunities. As use is the dominant factor, the appearance of the offering is customer specific.

Setting up and embedding a services development function in your organisation will enable you to add service revenue streams in an efficient manner.

Your service engineers will be the prime suppliers of input to your service development function. Similarly to proving input to your marketing function, the engineer and customer will feel appreciated when they receive feedback that their information is taken seriously.

Service as contributing centre

In achieving demand generation, adding sales roles and goals to the service department may sound as a logical thing to do. The profit contribution promise may even tempt you further.

Apart from the considerations in the previous paragraphs, beware that the creation of a secondary sales channel does invoke competition between the sales and service department. A competition that more likely will emphasise differences and prejudice than seeking the common ground.

Success lies in positioning your service department as a contributing centre. Let sales be in the lead. Use the traction of the sales department to get organisational and CEO buy in.

Make sales the internal hero by feeding them with high quality service engineer data. Empower your service engineer and make him the external hero.

As finishing touch, invest in a service marketing and services development function. Sales and service seek the commonality and acknowledge each other’s strength.

Published in Field Service News issue #13 (July/August 2016 and website