Michael Blumberg offers us an exclusive analysis of the research he has recently conducted to identify trends amongst service organisations when it comes to service contract revenue that shows the secret is 'all about the asks'...

Mize recently conducted a study among service executives and warranty professionals who are involved in marketing and selling service contracts and extended warranty (SC/EW) programs. The findings validate which strategies and tactics offer the best results which in turn will help managers and executives become more effective in marketing and selling extended warranty/service programs.

A total of 96 service contract and warranty professionals have participated in our survey.  Just over two-thirds (68%) of the survey respondents were representative of the B2B segment. The remaining 32% were from the B2C segment.

 

Essential Key Performance Indicators Amongst Field Service Organisations

Attach and Renewal rates are the primary Key Performance Indicators that companies rely on to evaluate the success of their Service Contract and Extended Warranty Programs.   A small percentage of respondents (15%) reported attach rates in the range of 51% to 70%.  Most respondents (45%) reported attached rates of 26% to 70%).  

Concerning renewal rates, while a majority (71.5%) of the respondent’s report renewal rates of less than 50%, over one-quarter have renewal rates of 76% or higher.  Half of these respondents have renewal rates over 90% demonstrating that this level of performance is possible.

Higher attach and renewal rates were observed among respondents from the B2B segment. This is attributable to the fact that companies in the B2B segment are often more engaged with customers during and post-sale than those in the B2C segment.   B2B companies may have multiple interactions with a customer before, during, and after the sale then B2C companies.  For example, in the purchase of a refrigerator, the retailer may have only one chance, usually at the point of sale, to sell an extended warranty during the point of sale.  In contrast, the seller of Construction Equipment may have multiple interactions with the customer throughout the lifecycle of the equipment. This increases their opportunities the seller must upsell, and cross-sell extended service programs.

 

Configuration

One of the key drives of successful Extended Warranty programs is Contract Configuration. This term, configuration refers to:

• the length of contract coverage,
• level of customization,
• processes/services engaged
• resources deployed in delivering the services
• entitlement levels offered.

With respect to length of coverage, most respondents (82%) surveyed to date indicate the typical length of SC/EW programs is equal to or less than three (3) years.  Among these respondents, slightly more than half (48.0%) offer programs that range in length between 1-2 years, while 52% have programs of 3-4 years in length.  The survey results suggest SC/EW programs have a shorter coverage period within B2B than B2C.   Slightly more than half of the B2B respondents offer programs that are 1-2 years compared to only 18% of B2C respondents. 

 

Customization

In terms the level of customization provided, over three quarters of the respondents offer SC/EW with some level of configuration.  While approximately one-half (54%) offer mostly Standard Configuration, they also indicate that some of the programs have some level of customization.  However, only 18% offer mostly Customized programs or entirely customized programs.  The remaining respondents offer only a standard configuration.  Customized programs are more prevalent within the B2B sector than B2C.  Nearly 82% of B2B respondents offer programs with some level of configuration while only 44% in B2C.

 

Flexibility of Terms

Slightly less than half (48%) of the respondents surveyed indicate that they provide their customers with the ability to terminate their contracts after they are purchased.  Among those who allow early termination, the majority (58%) allow for termination with penalties.  Higher attach rates and renewal rates are associated with companies that provide ability to terminate early.  

Approximately one-half (52%) of the respondents surveyed provide their customers with the ability to negotiate the price paid for service contracts. Higher attach and renewal rates were observed among companies who provide customers with the ability to negotiate.  This practice is more common within the B2B Segment.

 

Processes

When it comes to processes covered, most (86%) respondents will correct failures that customers experience during the coverage period. Other types of processes engaged as reported by 20% to 30% of respondents include preventive maintenance, calibration, planned inspections, consumable replacement, recalls, and remote product monitoring.  

In delivering these services, most respondents provide the following resources as part of the SC/EW program:

• Spare Parts (64%)
• Advanced exchange/parts swap (54%)
• Onsite Field Service (82%)
• Depot Repair (50%)
• Remote Support (57%)

A smaller percentage of respondents also offer Diagnostic tools (14%) and loaners (7%) as part of the SC/EW configuration.

 

Entitlements

Entitlements are another aspect of SC/EW configuration that customers will consider in their purchase. Entitlements can be viewed as the level of service they can expect to receive once a problem or claim is reported.   Almost one-half of the respondents (43%) provide a field service response time guarantee. Another 39% include guaranteed parts delivery time.  Other types of entitlements that maybe found with an SC/EW configuration include resolution time guarantee (21%) and telephone response time (36%) and loaner if problem can’t be resolved within 24 hours (18%).

 

Frequency of Communications

Survey respondents typically notify customers that their SC/EW programs are up for renewal. One half (50%) of the respondents indicate they provide more than 75-days advanced notification; 16% provide 90 days or more notification. Higher renewal rates observed among companies that provide 90 t0 76 days advanced notification. Two-thirds (68%) of respondents provide only 1-2 advanced notifications. The remaining 32% provide 3 or more notifications.  Higher Renewal Rates are observed among respondent who provide 3 or more notifications

 

Front Line Personnel & Automation

A majority (54.2%) of respondents involve front line service personnel in the sale of SC/EW contracts.  Approximately, two-thirds (68%) provide formal sales training while less than half (46.2%) use automation to facilitate the ability front line service personnel to sell SC/EW programs. Higher attach rates and renewals are cited among respondents that use automation to facilitate sale by front line service personnel

 

Summary & Implications

In summary, the more distinctions a company can make about its SC/EW program, the more likely customers will be to purchase it. In other words, customers consider the value of a service contract before they purchase it.  This maybe an “eye-opener” for manufacturers and their channel partners who take the view that a warranty is a warranty. Just because customers purchase their product doesn’t mean that they’ll purchase the SC/EW.

As the survey results indicate, the key drivers of a successful SC/EW program are level of customization, coverage and configuration, flexibility of terms, frequency of communication, use of front-line service personnel in sales process, and use of automation.  When it comes to selling service contracts and extended warranty programs, it’s about the asks. These observations underscore the importance of implementing solutions that enable Durable Equipment Manufacturers and their Channel parts to set up, sell, administer, track, and analyze various service programs.

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Further Reading:

• Read more exclusive FSN articles by Michael Blumberg @ www.fieldservicenews.com/blog/author/michael-blumberg
• Read more about MIze @ www.fieldservicenews.com/blog/all-about-mize
• Read more about research into field service management @ research.fieldservicenews.com
• Read more about Service Innovation & Design @ www.fieldservicenews.com/blog/tag/service-innovation-and-design
• Connect with Michael Blumberg on LInkedIN @ www.linkedin.com/in/blumberg1/
• Folllow Mize on twitter @ twitter.com/mizecom
• Find out more about the solutions offered by Mize @ m-ize.com

Following an appearance on the Field Service Podcast discussing digital transformation Michael Blumberg from Mize outlines some of the reasons why service leaders should be implementing their own digital journey, particularly in these unprecedented times.

 

Digital transformation (DX) is the process of using digital technologies to create new — or modify existing — business processes., culture and customer experiences to meet changing business and market requirements.

Digital Transformation in service

DX has gained increased attention among Field Service Leaders because it results in many benefits, including but not limited to:

Improved process efficiencies:

For example, DX initiatives have led to a reduction in paperwork by Field Service Engineers (FSEs) and an elimination of telephone calls to technical support personnel.

Increased productivity

DX automates manual activities and brings data and information to the hands of FSEs.  As a result, FSEs are more productive. Less time searching for data and completing forms means more time in the field, and more call completed per day.

Real-time data-driven decisions

DX initiatives make it possible for Field Service Organization (FSOs) to forecast demand, predict and anticipate service events accurately.

Stakeholder enablement

Through DX, companies can extend the reach of corporate systems and infrastructure to business partners, dealer channels, and service provider networks so they can optimize service delivery and maximize Customer Lifetime Value (LTV).  Employees can have tools they need to manage their day, improve performance, and generate additional revenue.

New business models

IoT enabled services, and Servitization models could not be possible without DX.

Ultimately, these benefits result in higher-margin revenue, and improved Customer Experience (CX) will, in turn, leads to a larger market share and improve customer retention for FSOs.

 

Stakeholders Driving DX

There are two groups of stakeholders that are driving DX.  The first group is end-user customers. We now live in always-on, always-connected, "let's do business now" economy.   Customers see the impact of DX in other industries and expect the same in Field Service.  Also, customers have no tolerance for uncertainty or surprises.   At issue, Field Service is full of uncertainties and surprises. DX helps mitigate these issues.  For example, DX enables the Uberization of Field Service, making it possible for the customer to obtain real-time notification of when the FSE will arrive at the customer site and the route the FSEs are taking to the site.

The second group of stakeholders is business partners such as the resellers/dealers, service provider networks, and suppliers. These parties operate as independent entities. However,  the Manufacturer relies on them to provide to deliver exceptional service, maintain customer loyalty, and generate high margin revenue.  By implementing DX initiatives that support these stakeholders, the Manufacturer helps itself protect its brand.   For example, providing resellers with online access to parts catalogs, inventory availability, and knowledge resources ensures their technician achieve a high first-time fix rate when they are providing service on the Manufacturer's brand.  

 

Level of DX Adoption in Field Service

DX implementations within the Field Service Industry aligns with overall technology trends we are observing across all industries. According to a recent study by Dell Technologies, 78% of participants say DX should be more widespread within their organization. Despite the vast potential of DX, most companies are just scratching the surface in terms of what they can achieve through DX.  Many businesspeople have concerns about whether their companies can effectively execute DX on time.  They believe there is a limited window of opportunity before their companies may become irrelevant.  Roughly half (51%) of the respondents in the Dell Technologies study indicate their companies will struggle to meet customer demands, and 49% worry their organization won't prove trustworthy in the next five years if they don't fully implement DX initiatives.

 

Underserved Segments

Quite often, when we hear about DX projects, the focus is often on use cases associated with concepts like Uberization of Service, Predictive, and Proactive Service enabled by IoT. These projects are significant and represent the future. However, they require a substantial investment in time and capital. Not every company is ready or able to pursue these types of strategies, and as evidenced by the market research, we shared in this article.   On the other hand, there are a couple of low hanging opportunities that companies can pursue that can be implemented relatively quickly and provide a "good bang for the buck," For example:

Online portals for customers, channel partners, and suppliers to initiate or respond to requests (e.g., work orders, support tickets, RMAs), observe the status of activities and track financial and operational KPIs 

 

• Electronic Forms to automate and streamline data capture
• Electronic Parts Catalogs to look-up, find, and order parts
• Unified Knowledge Platforms that make it easier for technicians and channel parts to find knowledge artifacts that may  found in disparate applications and databases

FSOs should not take these types of solutions for granted as they can result in significant ROI, a better service experience, and higher customer retention.

 

Why is now the right time?

At the time of writing this article, COVID-19 has forced companies to implement contingency plans to keep their customers and employees safe and ensure their products and services get delivered on time.  Companies who have implemented DX are likely to be nimbler in adapting to new realities created by the virus.   Remote Support, Proactive Service, Same Day/Next Day delivery…all made possible through DX, have now become the standard model of service during these times of social distancing and self-quarantine.   

There are, of course, many other reasons why FSOs might want to accelerate their DX initiatives.  First and foremost is the technology is readily available and doesn't require a large capital outlay because it is available on a subscription basis.  Second, the economics are favorable.  DX initiatives have proven to have a high ROI and rapid payback.  Third, DX initiatives have a positive impact on customer retention and loyalty.   Fourth, competitive forces and consumer preferences will dictate it.  Fifth, it is a good hedge against economic uncertainty. 

DX is a journey that all service professionals should be contemplating if they haven't already.

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Further Reading:

• Listen to the Field Service Podcast with Michael Blumberg on digital transformation @ hwww.fieldservicenews.com/blog/digital-transformation
• Read more articles by Michael Blumnerg @ www.fieldservicenews.com/michaelblumberg
• Read more articles on digital transformation in service @ www.fieldservicenews.com/digital+transformation
• Read more articles on the Uberization of service @ www.fieldservicenews.com/uberization
• Read more about Mize @ https://m-ize.com/

Mize announce the availability of a new Health Check designed to monitor the health of technicians and protect the safety of end customers.

 

Developed in response to COVID-19, this application enables organizations to assign service orders based on the health of their technicians.

At the beginning of each day, organizations can use the Health Check feature to collect vital health signs from each individual technician and automatically determine if the technician’s Health Check status is “Fit” or “Unfit”.

Health Check utilizes an intuitive user interface to capture information including the technician’s temperature and any COVID-19 symptoms the technician may be experiencing that day:

• Dry cough
• Lost or diminished smell
• Sore throat
• Weakness
• Change in appetite
• Difficulty breathing

Technicians receive a Health Check Status of “Fit” if their temperate is normal (96.0 to 98.6 degrees), and they have no symptoms.  Otherwise, their status is “Unfit”. 

Business Rules allocate and assign service orders based on the technician’s status.

Key features of the Health Check application include

• Automatically allocate and assign Service Orders to Technicians with a Fit status.
• Prevent allocation of Service Orders to Technicians with Unfit status
• Real time update and notification to dispatch schedule if a previously assigned technician’s status changes to Unfit
• Block Technicians with Unfit Status or who have not completed daily Health Check from starting work on a Service Order
• Enable Technicians with Fit Status to accept Service Orders from their mobile device
• Ability to access additional COVID-19 knowledge resources (e.g., checklists, videos, pdfs., presentations, etc.)
• Advanced Search capabilities enable an organization to search Health Check information by date, technician name, symptoms, and temperature

Health Check is now available as a free feature within Mize Service Smart Blox and Field Service Management Solution.

Click here to request a Free Demonstration of Mize Service Smart Blox and Health Check feature to learn more.

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Further Reading:

• To find out more about Mize click here.
• Read more about health and safety in service @ www.fieldservicenews.com/safety
• Read more about Field Service Software @ www.fieldservicenews.com/Field_Service_Software
• Connect with Michael Blumberg, CMO Mize on Linked In @ https://www.linkedin.com/in/blumberg1/
• Follow Mize on twitter @ https://twitter.com/mizecom

The world that we entered into at the start of 2020 is a very different one to the one we inhabit today. The Covid-19 novel coronavirus pandemic that brought national borders crashing down as we entered into a global lockdown has seen to that. Michael Blumberg assesses the situation outlines the challenges ahead and explains why he believes there is still a light at the end of the tunnel...

When I initially accepted the request to submit an article for The Handy Little Book for Field Service Managers, I did not anticipate that we'd be in this precarious situation. The topic that I intended to write about no longer seems relevant as we face growing uncertainty over public health and the future of the world's economies. Yet, the wheels of commerce continue to churn, and field service organizations continue to operate.

So, what can the service industry expect int the next 12 months? When faced with uncertainty, we can look to the past for insights and perspective of what we might be able to expect in the immediate future. If we consider this in terms of quarterly action plans, we will manage the next 12 months effectively

 

How Field Service Companies Can Manage the Pandemic

Over the next quarter, the service industry will need to do everything it can to move past this current crisis. While we might have the knee jerk reaction to throw our hands up in the air and proclaim, "we've never seen anything like this before," the truth is we have the means and ability to respond.

It is highly likely that segments of the economy, those businesses that are deemed essential, will continue to operate at full capacity and require high levels of service availability. In contrast, others will have decreased demand as they scale back operations to comply with shelter in place and lockdown orders. Field service organisations will need to be agile and flexible when it comes to resource and staff planning. If dealing with a large number of employees on sick leave, field service organisations can turn to subcontractors and contingent labor provides to augment staff.

To respond to social distancing and self-quarantine issues, field service organisations must ensure they have secure and reliable cloud-based systems in place to facilitate telecommuting. Field labor may be scarce due to illnesses, so field service organisations must ensure that have technicians who are working can easily find the parts and knowledge they need to resolve services right the first-time fix. There's no room for repeat visits.

"Field service organisations will need to have implemented the right technology and processes to facilitate this model..."

In dealing with social distancing , we may have to alter or modify service delivery. We may need to switch from a field service to Customer Self-Service or Remote Support. Field service organisations will need to have implemented the right technology and processes to facilitate this model. Guided troubleshooting, same day/next day parts delivery, Augmented Reality/Merged Reality, online customer portals, parts catalogs, and knowledge bases are all part of this model.

An essential thing that field service organisations can do is build goodwill and strengthen relationships with their stakeholders. This is required now more than ever. Managers will need to interact with employees who work from home through online communication platforms to ensure high levels of productivity and morale while employees work from home. Some customers may be faced with economic hardships and contemplate canceling their service contracts or placing their renewals on hold. Field service organisations can pre-empt this and build goodwill by offering freemium services and flexible payment terms. Field service organisations can also extend the length of service contracts, or explain to customers the contingency plans that they have put in place will not cause any disruption to their service.

 

A Rocky Road Ahead for Field Service Organisations

Medical experts predict that the spread of the Covid-19 Virus pandemic will begin to peter out and reach containment by the middle of Q3 2020. Even with government bailouts, economists predict that we will likely face a recession, and it could take another six to nine months to recover from it.Field Service Leaders should not be caught off guard. They can dust off their Recession Playbooks from 10 years ago and implement strategies to get through it.

During a recession, companies typically need to find ways to reduce or recover costs and create value. For field service organisations, a large percentage of operating expenses may be tied up in their parts inventory and labor. Field service organisations will need to implement strategies to reduce parts stock and recover the value from excess and obsolete inventory. At the same time, they'll need to implement processes and systems to ensure they have the right parts on hand at the right place when technicians need them to provide high first-time fix rates.

"Field service organisations mustn't abandon their plans when it comes to broader strategic initiatives like Digital Transformation and Servitization..."

Field service organisations will also need to remain flexible when it comes to resource planning and allocation. They may find themselves outsourcing their logistics operations to reduce costs or turning to service provider networks and subcontractors to deliver service. Of course, the field service organisation's service management systems must be able to connect and share data with all stakeholders and participants in their ecosystem.

Field service organisations mustn't abandon their plans when it comes to broader strategic initiatives like Digital Transformation and Servitization.

However, they may need to reprioritise them or reign them in at least temporarily. Instead of implementing multiple initiatives, they will need to focus only on the one that results in the highest return in the shortest amount of time. More then ever before, field service organisations will need to maintain strong rapport with customers and strive to obtain high service contract attachment and renewal rates. To maximize customer lifetime value and generate revenue from a satisfied installed base, field service organisations must rely on warranty and service contract management software solutions and continue to provide excellent service.

 

The Light at the End of the Tunnel for the Field Service Sector

Eventually, we will pull through this crisis and come out of it stronger and more resilient than ever before.  By late Q1 or early Q2, we are likely to observe what economists call "green shoots" as the economy begins to recover. Field Service Leaders mustn't lose sight of the mission and business objectives they established before this current crisis.

field service organisations must continue to manage their business against KPIs and achieve performance targets during the next 12 months if they expect to obtain investment resources to grow the business once the recovery is here quickly.

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Further Reading:

• Read more about how the impact of Covid-19 on field service @ www.fieldservicenews.com/covid-19
• Read more of Michael's exclusive features for Field Service News @ www.fieldservicenews.com/michael-bluemberg
• Join Michael's professional community @ www.fieldserviceinsights.com
• Follow Michael's work @ m-ize.com

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Michael Blumberg suggests optimising a technician's time can revolutionise your service offering.

In parallel to the Servitization trend that is occurring within Field Service is a growing desire among Field Service Organization to deliver proactive service.  This can be achieved by either attempting to dispatch a technician to resolve a problem before the customer even knows about it or by attempting to resolve or prevent the problem occurring in the first place using remote support tools.  Fortunately, Field Service Organizations have been able to turn to an ever-growing set of tools and technology to help them achieve this desired state.  From Dynamic Scheduling to Spare Parts Optimization, to AI tool, these technologies have focused on helping FSOs organizations deliver proactive service and optimize their business.   

 

Optimization in Field Service

Ultimately, optimization involves choosing between two or more alternatives that result in the most cost-effective or highest achievable performance given constraints, by maximizing desired factors and minimizing undesired ones.  For example, achieving the highest level of customer satisfaction while maximizing the first-time fix and minimizing cost all through a fixed inventory of parts and a limited pool of technicians.   Optimization technology has proven to be effective when dealing with strategic and tactical issues such as pricing, parts availability, and technician schedules.   This is because automation can facilitate this process of choosing between multiple alternatives and constraints to arrive at the best solution.

Except for diagnostics and analytics, optimization techniques have not been applied to the full array of operational decisions a Field Service Engineer (FSE) must make while they are onsite.  This is because unless we are dealing with service robots or cyborgs, it is almost impossible to automate/optimize human decision making. Humans don’t always solve problems in a linear way.

While we may not be able to optimize their decision, we can still help optimize their performance.  In other words, we can provide the tools that make the highest and best use of their most precious resource...time.  

 

Basically, FSOs can optimize job site performance by providing their FSEs with mobile solutions that provide access to critical feature functionality: 

• Work Orders:  FSOs can dispatch work orders to their FSE utilizing mobile solutions. In turn, FSEs can manage their time, routes, and schedules more effectively and make decisions that result in higher productivity.
• Install Base Data: Providing FSEs with information on their customers’ install base helps them understand the key characteristics of the customers' environment and service entitlements.   This enables FSEs to demonstrate their knowledge, anticipate needs, provide suggestions, and position themselves as trusted advisors.
• Equipment Service History:  This helps FSEs understand prior failures and corrective actions that may have been performed. As a result, FSEs can be more effective in diagnosing the problem and fixing the issue right the first time.   Like Install Base Data, access to Equipment Service History information helps FSEs in their role as a trusted advisor.
• Electronic Parts Catalog/BOMs:   FSOs can facilitate the first-time fix and improve FSE productivity by providing FSEs with mobile access to electronic parts catalogs and Bill of Materials.  These applications help FSEs search for parts, determine availability, and place orders for new ones.
• Knowledge:  Access to the right knowledge can be an impediment to first-time fix and timely service. While knowledge artifacts may exist within an FSO, they may be contained in disparate databases and difficult to find.  Searching for the right knowledge can be time-consuming and costly. FSOs can overcome these challenges through a unified, mobile knowledge platform that puts access to a broad array of knowledge artifacts in the hands of FSEs.
• Forms:  Mobile forms can help FSOs streamline the capture of critical service data. In addition, forms can be structured in such a way that they follow a standard workflow.  By implementing forms in this way, FSOs improve FSE utilization and ensure they capture the right data to resolve the issue right the first time. 
• Plans & Parts Sales:  FSEs create value for their customers and for their company when they can offer service plans, extended warranties, attachments, and spare parts to their customers. FSEs also demonstrate their role as trusted advisors when they are able to create value for their customers.  This is the ultimate measure of customer loyalty and satisfaction.
  

FSEs are the most valuable resources that an FSO has available when it comes to managing Customer Experience (CX) and service delivery. While advanced technology is making it possible for FSOs to resolve service issues remotely and even avoid dispatching entirely, there will still be situations where an FSE is required. By supplying FSEs with the right tools to optimize job site performance, they make the highest and best use of their time which in turn benefits the customer. FSEs become the true trusted advisors and rock stars when this happens!

 

 

 

 

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