Michael Blumberg, President, Blumberg Advisory Group, reflects on the seven most crucial considerations for service managers tasked with driving additional revenue in today’s market…
Revenue growth is probably the single most important objective for executives who are responsible for managing their company’s field service organisation (FSO) as a profit center or strategic line of business. “I want to double my service revenue in the next 3-5 years” is an incantation that I hear constantly from business owners and executives.
That equates to a 20% or more growth rate per year.
Sure, this type of growth is easily achievable if the market is growing at this rate or faster. I’ve found that these high growth targets are often triggered by management’s desire to take back market share from competitors or increase the share of service revenue contribution to overall corporate revenue.
While high revenue growth in a mature or declining market is difficult, it’s not impossible. A little work is usually required to achieve this type of performance.
To understand where the emphasis is needed, let’s look at where service market programs may fall short:
#1 – Service Portfolio not meeting customer needs:
Quite often service providers fail to meet their revenue objectives because their service portfolio is no longer meeting customer requirements. In other words, they have failed to offer services tailored to their customer needs. For example, offering only next day response when customers require same day.
#2 – Pricing not optimal:
If service revenue is flat or declining, a service provider might want to look at their pricing strategy and tactics. Perhaps their service prices are no longer competitive.
On the other hand, they may be underpricing their services in relation to the value they provide.
#3 – Failure to understand competitive threats:
Many service providers, particularly those that are divisions of manufacturers, fail to understand the competitive threat of third party maintenance (TPM) companies and/or in-house service providers.
For example, they often under estimate the value that TPMs provide to their customer and/or fail to develop an effective value proposition to compete against them.
#4 – Failure to articulate value:
The single biggest reasons why customer don’t purchase service agreements is because they don’t understand their value. An FSO must ensure they have clearly articulated the value of their service offering to current and prospective customers.
Do customers the cost of downtime or the pain points that their services help solve?
It is important that FSOs not only articulate value to their customers but also make sure that their sales people understand it and sales people are provided with the appropriate sale aides and marketing collateral to support it.
#5 – Lack of communication & follow-up:
One way to increase service revenue is by improving contract renewal rates.
These rates often decline though lack of consistent communication and persistent follow-up about the value of services provided, when contracts are up for renewal, special incentives for renewing, and information on when they are about to expire.
Customers are likely to forget about their experiences even if they are positive ones after 30 days. That’s why it is important to follow-up once a month.
#6 – Not asking for referrals or testimonials:
A recent study by HubSpot, a marketing automation software provider, found that 85% of companies who achieve year over year revenue growth do so because they ask for and receive referrals from their customers. Referrals are the best and least expensive source of generating new business.
The problem is most FSOs forget to ask for them. Remember customers speak to each other. They may be involved in the same networks and trade associations, or call on each other for advice and guidance. Why not enlist them in your business development efforts, even if it is to influence their peers in other companies who already know about the services you offer.
#7 – Lack of customer appreciation:
Your customers will remain loyal to you and purchase more from you when you let them know how much you value and appreciate them.
It’s the simple things like a courtesy phone call/visit, thank you card, small gift (i.e., rewards program), or exclusive offer that let them know you value their business. These seven focus areas have one thing in common, they all benefit from market research.
Whether its information that will help redesign a service portfolio or modify pricing, market research provides an unbiased and unfiltered perspective on what customers are thinking and doing. More importantly, market research, when designed effectively will uncover valuable market intelligence that may not have otherwise been captured from a sale’s call or courtesy call made by a company executive.
By implementing all seven approaches to revenue growth, as outlined above, on a highly disciplined and consistent manner, an FSO can expect to achieve a 30% to 120% increase in sales in just one year alone.