Selling the Concept of Servitization
Perhaps the biggest hurdle companies face when it comes to innovation is convincing others, especially customers, to get on board with the vision…
Often companies wait for the proof of concept before they to sign up. After all, nobody wants to be the fool that backed an untested project – especially when it comes to an area as mission-critical as field service delivery. So how do we go from service design innovation to successfully selling servitization?
It is not a one size fits all solution, and customer selection is undoubtedly a significant consideration as Maarten Wijnheijmer, Global Aftermarket Sales Director, Howden explained stating;
I think perhaps one of the most important points around servitization is that you cannot sell the concept to everyone immediately…
– Maarten Wijnheijmer, Global Aftermarket Sales Director, Howden
“I think perhaps one of the most important points around servitization is that you cannot sell the concept to everyone immediately. Although an even more important point around servitization is that, if you want to keep it simple and practical, you don’t need to sell it to everyone immediately either. The trick is to start with customers that recognize the value, test the proposition with them and then scale-up.”
However, selling a major servitized project is something that Coen Jeukens, VP Global Customer Transformation, ServiceMax was able to offer direct experience of during the session.
“In my previous role with Bosch selling safety and security systems. What we did from servitization model within the organisation was to seek out a customer that was already mature enough to want to run. In our particular case that was Schipol airport in Amsterdam,” Jeukens explains.
“Here there were thousands of cameras, and as an OEM I would love to sell thousands of cameras to any customer, but the margins on these are very low. So we started a conversation that where we asked the airport ‘what do you really need, do you really need the cameras?’
“The airport told us that what they really needed was the camera feeds. Now that makes the make and model of the camera irrelevant. However, they then went even further, as when ten thousand feeds are coming in, it is an almost impossible task to monitor them. So the airport went further by saying ‘we don’t want all the feeds, we only want the feeds that require action.’
“The product is the camera, the output is the feed, but the outcome is the actionable feed. This made it much easier for Bosch to say that of course, we understand what it is to supply cameras. However, we also know from a video management system and intelligent video analysis how to use that in combination with the cameras. That is the digital layer above the products that is so crucial in complex servitization projects such as this. So in this particular example the solution sold to the airport was the entire infrastructure, but the outcome they were paying for was the delivery of actionable feeds.”
While Jeuken’s example is one of inspiration of what can be achieved, there are many challenges to developing such a successful and ambitious project. Connecting with customers and engaging with them at the right level is the first essential step.
We find that in today’s marketplace people move fairly rapidly…
– Christo Roux, Director, Field & Workshop Services, Outotec
“When it comes to selling service, we find that one of the challenges is that there are quite different levels depending on the organisation we are talking to who need to be brought into the conversation,” explains Christo Roux, Director, Field & Workshop Services, Outotec
“Also, we find that in today’s marketplace people move fairly rapidly,” he adds.
“The days that we used to have a maintenance manager that was fifteen years in the position are in the past, and that just doesn’t happen anymore. As a result, we tend to be dealing with different individuals within the same company relatively regularly which of course can change any momentum that you might have built up within the relationship and the understanding of how you could bring a servitized offering to them.
“Also, when someone takes on a new role, often what they need to do is make some radical changes and get some short-term wins. When you are talking about a long-term offering and how you can bring the value together to the organisation, that can quite often take a secondary stance. It isn’t easy to establish long-term conversations in this scenario.
“When you have longer term relationships and when you are able to get into a position where you can have a longer term offering and then start proving those values that you bring through your services I think that makes a big difference.”
I have seen some successful companies who really got it right by also having high attachment rates as the product sales team sells services
– Jan van Veen, Founder, moreMomentum
Jan van Veen, Founder MoreMomentum, is a service professional who has a relatively unique experience of working with several organisations in this area also adds some strong advice.
“When it comes to selling services, I have seen some successful companies who really got it right by also having high attachment rates as the product sales team sells services but also having a service sales team for follow up service sales. What really did the trick there, besides training and content ,was an incentive scheme which only allowed the product sales team to receive commission if there was a service contract attached to the sale.”
“This was not necessarily contribution margin, because then you are saying one is better than the other. I think this is a mistake because ultimately we want both. Without equipment, we have no service, so we don’t want people to sacrifice equipment sales because we get better margins on service. So, in this particular example, the organisation ensured that when selling equipment they were also consistently simultaneously selling a service contract.”
“Additionally, they implemented strict rules around discounting service contracts. There is only one person in the organisation who can agree to a discount and that is the top director of sales and it is not easy to get it approved. With a system in place like this they of course saw an increase in the sales of services.”
“Beyond this initial sale, the next step in terms of selling service, is to have a follow up conversations exploring cross-selling and up-selling ideas and to have a farming or nurturing team. This second team could either be part of part of the total account management team or localised to focus on selling services offerings depending on the organisational set up.”
The challenges and opportunities of establishing a servitized offering remain complex yet appealing. Perhaps now more so now than ever as we look at an extended economic downturn where service is set to become the backbone of our economy.
All members of the Field Service Think Tanks are speaking from their own personal opinions which are not necessarily reflective of the organisations they work for.
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