Instead of lying low and focusing on cutting costs, nimble companies strive to increase the top line by redesigning their service strategies. While staying lean is necessary, where and how companies trim costs makes a significant difference in their customer services. Cost cutting that leads to degraded service quality and drives away customers is detrimental. Yet managing costs effectively is only half the answer. The other half lies in expanding service revenue by transforming the organization from product-centric to service-centric.
Best-in-class companies are doing a number of right things to increase revenue and manage costs while they provide uncompromising service quality. The results of employing these best practices are improved customer loyalty, increased revenue, and reduced cost. All of these benefits translate into higher profit now and in the future.
· Develop a sound service-positioning strategy.
· Develop a service matrix, not just services.
· Market and sell product and service together.
The first step in developing a sound service-positioning strategy is to decide where the company wants to be along the service strategy continuum, from providing minimal service for a company’s own products to offering services for one’s own and other companies’ products. The next step is to develop the service portfolio with a structured approach:
Define and profile the services your company would like to add to its service portfolio. The service profile should include the name and description of the service, primary customer segments that are buying – or will likely buy – the service, geographic regions in which the service is or will be offered, products to which the service is linked, average contract value for a typical buyer, and total number of contracts sold in the past and projected in the future.
Conduct a comparative analysis on the use of each service by segment. For each service, create a visual model that compares the revenue to buying power by segment. This affords the opportunity to evaluate the revenue potential of a particular service. Additional analysis of future service candidates may be conducted through expert interviews, executive interviews, and market research.
Conduct voice of the customer (VOC) interviews to identify or validate the services with the highest revenue potential by segment. Conduct focus group studies or surveys to identify service attributes that may provide differentiation opportunities. This step often results in the creation of a portfolio of potential services with articulated attributes.
Evaluate the service portfolio against the company’s strategic service vision. A services vision can guide positioning, re-positioning, budgeting, and implementation of existing and future services.
Many companies approach service offerings as point solutions. To improve your chance of maximizing service revenue, it is far more effective to consider these solutions as part of a service matrix. Along one axis are various services available over the customer lifecycle, and along the other axis are various service partners. Each type of service and each layer of channel influences, enhances, or conflicts with the others in this complex relationship. With this service matrix, marketing can help customers understand how and where to acquire service at any time, and partners and distributors are clear about their service roles.
Marketing a service is quite different from marketing a product. Because of the intangible aspect of services, what a company sells is the overall relationship. Service consists not only of specific activities to be performed under a service agreement, but includes a set of capabilities behind a particular offering. Be careful about what services the company gives away free, for this decision may lead to higher-than-expected cost.
For example, a PC manufacturer offered a three-year warranty with every computer sold. As PC prices decreased rapidly, the cost of service remained the same, resulting in decreased profit. Giving away services may also devalue them in the customers’ eyes. When marketing your services, keep in mind that it is difficult for service buyers to obtain a straight price comparison between service offerings, especially when they are bundled with products.
Companies must make a commitment to attach services to all product sales. To increase service purchases, they can enforce a process to quote the cost for service or for the product/service bundle. If your company’s strategy is to use services to pull products, employ dedicated field and channel marketing to drive the sale of services; otherwise, train sales personnel and call-center staff to seek opportunities for service sales. For instance, at Citibank, customer service representatives are trained to track the customer through the customer product lifecycle and offer appropriate services.
While maintaining a lean service organization is imperative, trimming in the wrong places likely will impair the company in the near term and in the future. The real challenge of customer service cost reduction is not to reduce costs but to improve the customer experience while reducing support costs. Done correctly, self-service and outsourcing can help your company reach both goals.