Service Rules for Customer Retention are Changing—Are You Keeping Up?

Written By: Iain Michel
  • 12/9/2020
  • Read Time : 3 min
Learn more about the changing service rules for customer retention

Feeling forced to choose between controlling service costs and improving customer service? With smart planning and the right tools, you can accomplish both.

Industrial markets are increasingly embracing product-as-a-service models, which monetize capacity, usage cycles, uptime, consumables, and outcomes, rather than selling fixed pieces of inventory. The forces behind this change are complex, from customer expectations and rising product complexity, to commoditization pressures and global competition. Similarly, refocusing your revenue model around service is not a trivial change adjustment. It requires successfully managing service outcomes and service costs—which poses both benefits and risks to the service providers ready to make the move.

Service departments find themselves with a new model for revenue that comes with new rules for success, and an increased level of importance placed on that success. They have to deliver service that demonstrates value and ensures success, while providing it more efficiently. So, no pressure, right?

 

The Pros and Cons of Subscription-Based Revenue

Successful, long-term subscriptions provide clear financial benefits over selling products and license agreements. Subscriptions represent evergreen revenue opportunities, with renewals requiring less sales and marketing resources than sourcing and closing new pipeline. On the flipside, subscribers are inherently more mobile; dissatisfied subscription customers can more easily switch vendors when their contracts expire. This significantly raises the stakes for vendors to satisfy their customers. You become more accountable for the overall success of your customers and are directly tied to the successful usage of your products. It adds greater emphasis to metrics like your Net Promoter Score® (NPS), which calculates the business impact of customer satisfaction.

 

Changing Models, Changing Rules for Service

One approach to ensuring customer retention is to pour substantial resources into a win-at-all-costs service philosophy. And while this will bolster metrics like NPS, Customer Effort Score (CES), or Customer Satisfaction Score (CSAT), it can turn your service delivery department into a massive cost center. While this may be a win for your customers, it can have a disastrous impact on companies that have shifted to a subscription-based revenue model. Here’s why:

As suppliers shift their revenue model towards service, support, and success, the efficiency of service delivery takes on outsized importance. For example, if only 15% of your revenue comes from service and additional contracts, inefficient service can be regarded as cost of doing business (albeit a painful one). If service, consumables, capacity, and other success-based metrics make up the lion’s share of your revenue, inefficient service delivery can strangle your business viability and future growth potential.

Alternatively, other service approaches may focus purely on cost-focused strategies, looking to hit the minimum viable service commitment to meet their SLAs. This strategy can create the opposite problem. While in the short term, service departments may find themselves cost-neutral or even functioning as a profit-center; in the long term, minimum-viable efforts won’t shrink your costs. Instead, it will shrink your customer base, as they seek out suppliers who work harder to become partners in their shared success.

 

Threading the Service Needle with Digital Service Optimization

A new service model with new rules means there must also be new solutions to create success. Innovative service leaders are already pioneering technology-based solutions to ensure customer retention while delivering those services more efficiency. Conveniently, as service teams research solutions they discover a digital foundation—such industrial Internet of Things (IIoT) and augmented reality (AR) platforms—is often already in place within the manufacturing and production side of their operations.

By adapting connectivity, IIoT, and AR for service goals, service-focused leaders (like Varian Medical Systems) are redefining distinct functions and touchpoints—building a holistic “service waterfall.” Powered by industrial connectivity, this waterfall is designed to provide the best and most efficient service response to any customer need. Digital service optimization solutions include:

  • Real-time monitoring, control, optimization, remote access, and built-in value-add services shared directly with the customer (See how Vantron does it)
  • Remote service and customer self-service to minimize truck rolls and onsite visits
  • Technician efficiency resources to ensure that when needed, onsite service is immediate, rapid, and delivered effectively on a single visit

With a solid understanding of this service waterfall, and the underlying digital transformation needed to deliver it, those who make and support smart products can master a new, more competitive business model based on superior customer satisfaction. Correctly implemented, these touchpoints reduce your service delivery costs, while dramatically improving your customer satisfaction outcomes. And many of these solutions are based on pivoting towards providing customer support at a distance, which has become a critical requirement in today’s uncertain economy, as you face travel restrictions and social distancing requirements.

The good news is that these foundational technologies are relatively easy to pilot and scale for increasing service value. More importantly, it meets the cost and performance requirements needed to ensure customer retention—with satisfied customers who enjoy uninterrupted use of your mission-critical offerings.

 

Improved Customer Retention and Satisfaction Starts with Measuring the Right KPIs

To gain a more in-depth understanding of how customer satisfaction can be quantified, measured, and marketed as a competitive differentiator, click over to our interactive infographic, 3 KPIs That Improve Customer Satisfaction. Featuring real-world customer success examples, it illustrates how IoT-driven service dispatch solutions are a game changer for your uptime, first-time fix rates, and mean time-to-repair KPIs.

3 Key Customer Satisfaction KPIs

Tags:
  • Improve Customer Satisfaction
  • Industrial Connectivity
  • Industrial Internet of Things

About the Author

Iain Michel

Iain applies his years of broad market expertise to build connected product solutions that incorporate PTC’s industry-leading CAD, PLM, IoT, and AR technologies. Working closely with customers, Iain helps implement these solutions to exceed operational excellence goals and deliver true digital transformation.