Businesses are realising that good service is not something that can be bought as an instant solution and convincing customers that they are getting value for money becomes ever harder as customers demand more for less. Successful companies have been persevering for many years, focused on delivering value to the customer. They have found that service works best when it resonates with the business and the business resonates with its customers. Businesses can ‘talk up’ service but the problem is delivering.

The average state of service operations is not as good as the marketing hype might suggest, and any discussion of good practice in the service industry today really only refers to the top performing service companies, which are no more than 15% to 20% of the total. These top performing companies, however, are making a lot of money from service because the customers begin to do all the hard work of marketing and selling the value as they become active promoters of their supplier. Endorsement by a regarded third party is the most effective way to sell.

The result is that the cost of customer acquisition falls, and those funds previously dedicated to acquisition can be reinvested into the customer. But getting to such a position is not easy. Good service has to start at the customer interface because it is at this point that the business adds value to the customer
in a tangible way, and research shows that this is where many businesses create new opportunities to generate revenue and differentiate their offering.

The simple break/fix environment that was service management is giving way to a much more complex customer environment. It now includes customer retention, cost of acquisition, service delivery, performance management and customer loyalty. Maintaining control and managing growth with this increasing complexity, without support, is putting strain on companies.

A service provider should be regarded by its customers as a trusted advisor, one who will add value to their situation. Creating value for customers makes you special. Understanding what that value is to the customer is essential. Understanding can only be fully achieved by working effectively and synergistically with customers, understanding their needs (possibly more intuitively than the customer themselves) and creating the most profitable climate for both customer and supplier. 

The old customer service rules:
Rule 1 – The customer is never wrong.
Rule 2 – If the customer is in the wrong
refer, to Rule 1. 

Those rules now have to be re-written:
Rule 1 – Never let the customer feel they are wrong  you really are there to help
Rule 2 – If you are not adding value you are adding cost – and someone will have to pay

Many companies claim that customer loyalty is a nebulous quality. The reality is that it is anything but. Simple questions and results will indicate levels of loyalty, based on the value that a customer derives from the service delivered to them:

• Where do new customers come from: Recommendations or very successful but expensive salesmen?
• How long do they stay: For life or as short a time as possible?
• What percentage of your customers will give you a reference: 100% or very few if any?

It stands to reason that it is the combination of people, process, relevant technology and product that drives all value. To establish your operation as a leading service provider, these elements have to be in harmony so that they resonate with each other. Strategic service management is about getting this combination to resonate with the customer at the customer interface (wherever the customer decides that is to be, from the CEO to the engineer).

Leadership from the top down is essential, but the customer meets the engineer more often than the CEO and is more dependant on that engineer. The customer assesses the quality of the company by the way the business handles the engineer coupled with the way the engineer behaves, so the service excellence chain has to work bottom up. 

Engineers as trusted advisers
It is absolutely necessary to develop your service team into ‘trusted advisors’ who can provide significant value to customers, both directly and indirectly, able to work with customers more effectively to generate additional revenue. It is also essential to provide the process and relevant technology to support that interface. Empowerment of staff is a great concept but it shouldn’t involve making staff depend on poor process and technology support while merely hoping that good people will rescue the situation (without the necessary training) when it all goes wrong. This risks upsetting both the customer and the support engineer.

Most service organisations 15 years ago were developed from the manufacturing operation (back to base repair and then field repair). Many of the same attributes and measures were evident: keep the costs down, and make sure the engineers are seen but not heard. Though many aspects of the service operation are similar, customer demands are not, and many companies have not responded to those changing needs, quite often because they have not been aware of them.

Wearing thick gloves protects the hands from extremes of temperature. If you are not managing the customer interface it is like wearing thick gloves because you won’t ‘feel the temperature’ of your customers.

In many cases, service is still seen as a break/fix commodity where price and performance are everything and the job specification is still to fix equipment not fix the customer. The change in priority has not been identified, although the engineer may have developed new skills for self preservation. The task has to be to look after the customer not the equipment, but this requires very different skills throughout the business. The top 15% to 20% manifesting good service operations maintain a close dialogue with their customers through the customer interface, and use the output to drive strategic service management throughout the business.

Companies investing in the customer interface have recorded enormous benefits in the past two years because of the growth achieved in service revenue and profitability.

Analysts are now ‘talking up’ the value of investment in service, because even for an average level of investment in service of no more than 15%, the revenue and profitability returns can be far greater, with every £1 spent on service giving a bigger return than if the money were invested anywhere else in the company.  This has been reflected in British manufacturing growth this year for the first time in more than a decade, achieved by developing niche products and solutions aimed around service.

The following are some of the signs evident within a successful service company that is achieving growth and profitability from close customer relationships.

• There is a passion for service within the company shared by the whole team
• There are accurate up-to-date service-delivery measures
• The business understands the true costs of delivering service per customer
• The business can compare cost of service with revenue earned by customer
• The business understands and is regularly reviewing and improving the support processes,  such as: dspatch and scheduling operation; call/contact centre; parts planning, logistics, and parts deployment
• The business knows where it adds value (in the customer’s opinion)
• The business knows the customer well enough to add value through their skills in applying service solutions to their customer‘s needs
• The business knows how the engineers work and where they add value
• The business knows how many customers actively promote their supplier’s services to others
• The business capitalises on complaints, a good recovery will always win loyalty points
• The business continually investigates customer needs both today as well as tomorrow
• The business has developed their engineers into trusted advisors who are proud of the service they deliver and proud of the products that the business provides, not in a ‘sales way’ but borne of the knowledge about what their customers value from the equipment and service provided to them.

In summary, strategic service sanagement is not a new tool that is going to transform the business, but is about bringing the customer into the heart of the business. Ultimately we are in business to improve our customer’s business and as suppliers we have potentially much more knowledge about the value of our offering than the customer does.

A good salesman can paint the vision and carry the customer along, but the rest of the business has to deliver that vision and continually tailor it to the customer’s changing needs to achieve resonance. A customer will get so much more out of a solution than could ever have been imagined when your capability is seen as a given, and the best value is in providing the customer with pure differentiation away from their competitors, and then helping them deliver to their customers. They then become your advocates and your most cost-effective salesmen.

A devoted, loyal customer can be worth 10 times more to a business than the revenue earned from them, and it is when the customer understands the value you provide that they start returning the value in ways only they can. SM