Chapter 1 of 3: Introduction
Businesses are increasingly depending on revenues from services as an important source for a company’s growth and profitability (especially product-centric manufacturing verticals which have witnessed shrinking product margins because of commoditization). Factors affecting service revenues are varied and complex, while the art of tapping this revenue stream is still being perfected.
If you are operating your service organization as a profit center, there are two ways to create a higher yield from the business in terms of overall profit: reducing costs and/or increasing revenue. Typically speaking, the service leaders have prioritized improving the customer experience (a derivative of increasing revenue) and decreasing operating costs (both of which are functions of creating higher profit). For the last 4 years preceding 2021 (2016-2020), the Service Council’s annual Service Leader’s Agenda benchmark survey witnessed these two focus areas (cost and customer experience initiatives) as the #1 and #2 vote getter in terms of executive priorities. Service revenue has consistently been tertiary in focus (one can argue that by focusing on the customer experience, customer defection is avoided, and customer expansion is enabled).
Interestingly, service revenue has become the top metric and focus area amongst service leaders in the 2021 iteration of the annual survey and rightfully so (see charts below). In 2020, the pandemic (Coronavirus, COVID-19) caused many businesses to place an emphasis on cost cutting measures in the spirit of business continuity. However, 2021 saw service leaders shift their attention to service revenue. As the old saying goes, “you can’t cut your way to growth.”
Chapter 2 of 3: Sources of Service Revenue Growth
Generating service revenue can be an outcome of two principal strategies:
- Introduction of new commercial service revenue streams to existing customer markets (i.e., cross-sell/up-sell)
- Introduction of service capabilities and programs to expanding customer markets
As service leaders turn their focus towards revenue growth, they will continue to place an emphasis on contract attach rates (at the point of product purchase in manufacturing centric industries). They will also look at a broader set of capabilities enabled by digital transformation initiatives aligned with customer expectations for predictive and more immediate service and support and through emerging channels of preference, including self-service portals, visual support technologies (Augmented, Virtual, Mixed, Extended Reality – AR, VR, MR, XR) and more. An overview of the leading revenue sources can be found in the chart below (these revenue sources revealed in recent research conducted by the Service Council). Service leaders will expand on traditional offerings such as service contracts, extended warranties, service level agreements, service parts sales and time & materials revenue streams with new innovative offerings, including consultation & advisory (subject matter expert accessibility), information & dashboards and as-a-service (outcome-based service) revenue models.
Chapter 3 of 3: The Intelligent Service Revenue Enterprise
Another source of service revenue creation has been the empowerment of the enterprise with service and customer intelligence. Field Service Engineers (FSEs) / Technicians can gain an intelligent view into the 360° view of the customer for the purpose of warranty entitlements, customer and asset history, and the empowerment of service (spare) parts/consumables ordering. It has been an ongoing debate whether FSEs should take a commercial position with customers and represent commercial investments and revenue generating opportunities (or be a function of lead referral). The 2021 Voice of the Field Service Engineer (VoFSE) benchmark survey, which surveyed 850+ FSEs, revealed ‘Pressure to Sell’ had minimal effect on Career & Employee Satisfaction (perhaps even inconsequential to employee engagement and now an expected function).
In a recent webinar featuring Pye-Barker Fire & Safety, a leading provider of fire detection, suppression, and protection products and services, Nick White (Regional Director of Sales) outlined a strategy recently deployed which was aimed at building trust equity amongst their customers and prospects through service intelligence provided by their technology partner Convex. Using a geo-location platform which provides infrastructure and contextual data, Pye-Barker Fire & Safety sales executives were able to build “trust equity” in an even more efficient manner which resulted in greater execution in terms of new business acquisition but also presented a barrier of entry and a shorter pathway to cross-sell/up-sell within its existing customer base. The technology initiative resulted in a 25% increase in closed business in the first quarter post-deployment and 85% year-over-year increase in revenue. The initiative also resulted in a 41% increase in revenue per sales representative.
Charlie Warren, CEO of Convex whose platform enabled the impressive results above, commented, “In today’s business climate, the old saying ‘cash is king’ is being supplemented with a methodology where the ‘new logo is king’. Service organizations are seeking to not only acquire new logos but are also stressing the importance of identifying cross-sell/up-sell opportunities, aligning existing customers into different tiers of service engagements. And all of the above is expected with less resources (i.e., doing more with less).”
Warren continued, “Pye-Barker has achieved impressive results in a market climate that was quite challenging. By transforming their service operation to embrace an intelligent approach to acquiring new business but also expanding its existing customer relationships, they’ve created a single pane of glass to drive efficiencies across their commercial sales teams, resulting in extremely impressive revenue performance but also increasing utilization across their sales team – doing more with less.”
The empowerment and visibility to customer-related data to empower sales and field-based teams should be an imperative amongst service leaders. In fact, visibility to customer data across prospective markets (key contacts, buyers, existing infrastructure, etc.) can also enhance revenue generating activities by way of onboarding new customers (in many cases earning market share from competitors).
Where does your organization fit into the overall spectrum of the Intelligent Service Revenue Enterprise? Well, it could be at any place along the overall continuum. However, one thing still
remains clear. Nobody should have a better shot at capturing additional service revenues from your customers than your organization and knowing your customer can be the difference. They are essentially yours to lose – and you may lose them if you do not have effective contract attach/renewal processes in place or do not have visibility into data which may empower you to position commercial engagement opportunities. That is why most services organizations have already taken this route.
A fast-growing technology solution provider Convex, has introduced an intelligent service revenue platform called Atlas.
The software has provided many organizations with the visibility into not only knowing their customer better but expanding the customer footprint as well through property-based insights.. If you would like to learn more, please visit www.convex.com or watch our webinar The Intelligent Service Revenue Enterprise.