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Connected Customer Experience

Best Practices to Increase Service Contract Revenue

Author Tim Nissen on Jul-21-2020

20-Jul_2020

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.

Key Performance Indicators

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 in the gap between 26% and 70%.  

Concerning renewal rates, while a majority (71.5%) of the respondent’s reported 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 B2B companies are often more engaged with customers during and post-sale than those in the B2C segment.  B2B companies often have multiple interactions with a customer before, during, and after the sale, compared to B2C transactions.  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 to upsell and cross-sell extended service programs.

Service Contract Configuration

One of the key drives of successful Extended Warranty programs is Contract Configuration, related 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 indicated their 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 ranging between 1-2 years, while 52% have programs of 3-4 years.  The survey results suggest SC/EW programs have a shorter coverage period with 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. 

Custom Configuration

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 provided 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% of B2Cs.

Terms Flexibility

Slightly less than half (48%) of the respondents surveyed indicate that they provide their customers with the ability to terminate purchased service contracts.  Among those who allow early termination, the majority (58%) included 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 contracts. Higher attach and renewal rates were observed among companies who provide customers with the ability to negotiate (most common among B2Bs).

Covered 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:

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%).

Renewal 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 between 76- and 90-days’ notice. Two-thirds (68%) of respondents provide only 1-2 advanced notifications. The remaining 32% provide 3 or more notifications.  Highest Renewal Rates are observed among respondent who provide 3 or more notifications.

Front Line Personnel and Automation

A majority (54%) 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%) 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 sales by front line service personnel

Summary & Implications

This survey’s findings indicate that 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 commodity. Just because customers purchase their product doesn’t mean that they’ll purchase the SC/EW.

As the survey results reveal, 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.

Automate with Mize

The Mize Service Contracts Management system enables functionality to:

  • Set up flexible service programs configured to your industry, product, and customer needs
  • Administer Contracts, Support, and Claims to improve profitability and customer satisfaction
  • Enable your company and Channel Partners to optimize Service Contracts sales, renewals, and fulfillment
  • Empower Customers to manage risk, limit repair costs, and minimize product downtime.

See the Mize system – request your demo today.

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Shared Service Knowledge to Build Ongoing Continuity

Author Tim Nissen on Jul-9-2020

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Aly Pinder, Program Director for Service Innovation & Connected Products at IDC, discusses how knowledge transfer can be seamless across service organizations.

Employee turnover is detrimental to knowledge loss within organizations. IDC Manufacturing Insights’ 2019 Product and Service Innovation Survey highlighted one of the top drivers for manufacturer’s service lifecycle management (SLM) efforts is a need to capture and make accessible service knowledge and best practices. In building a culture of shared intelligence and accessibility of service knowledge, nearly half of organizations (42.7%) sampled in this study plan to leverage mobile devices for increased collaboration amongst the service team.

These investments and prioritization demonstrate how much risk is inherent with having an entire workforce, which often goes out on its own for an extended period, rarely coming back into a centralized location, and is one of the closest resources interacting directly with customers. The challenging part is the value service employees have to the customer experience is becoming more, not less critical for manufacturers and service organizations.

In advance of losing service workers, Aly suggests you consider the following:

  • Identify your workforce that is planning to retire soon. Do you survey your technicians and service team, at least annually, to ask them when they plan to retire? Assuming your service workers will retire at the retirement age of your respective country is quite risky. Reaching out to your team to identify when they plan to retire allows the organization to determine the level and urgency of the risk, plan for the loss, and even proactively strategize to either retain or hire more aggressively in advance of the damage.
  • Get creative with retention. Organizations should establish a program that enables service team members to be able to work as a centralized expert. Gamification and incentives can be used to create a bench of technicians and service employees that are willing to stay with the company, accelerate the rate of capturing best practices, and recognize the value of the decades of experience held in the brains of the service experts. Organizations would be wise to establish a role that is based on identifying qualifications or attainment of a specific expertise level, which can extend the viability of a seasoned service worker staying on the team.
  • Show your newer workforce a career path that is rewarding and valued. Many organizations struggle with creating tangible and exciting career paths for the workforce. Career paths are difficult to detail as there are so many variables, both for the employee (especially the remote-based) and the organization. However, the ability to communicate a future for the service team is a critical step in addressing the workforce skills gap, which should go hand in hand with trying to retain more seasoned employees. This practice will help create a culture that values the service worker experience and show the workforce where they will fit in the broader strategy of the organization.

Talking about the retiring service workforce must not be the end of the story that we tell each other, organizations must act now. Technology is one of the ways to capture and make accessible service knowledge. Still, manufacturers and service organizations need to identify their own risk and build a strategy around addressing the loss of critical service knowledge.

Collaboration and shared purpose will enable organizations to get in front of this pending wave of retiring workers.

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Webinar Recap: Manufacturers Creating Enhanced Customer Experiences by Reimagining Service Lifecycle Management

Author Tim Nissen on Jul-1-2020

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This month's webinar, hosted by Mize, Inc., highlighted the top priorities for manufacturers and services organizations driving investments around service innovation. Improving the customer experience, growing revenue, and innovation through knowledge management figured prominently.

Our presenters, including Aly Pinder, Program Director for Service Innovation & Connected Products at IDC, Stuart Ransom, Chief Revenue Officer of Mize and Michael Blumberg, Chief Marketing Officer of Mize, led the discussion of how end-to-end service excellence enables the framework to meet the challenges faced today and in the future.

Jun-on-demand-webinar-2020

Challenges Faced in a Time of Disruption

While disruption caused by innovation, it also provides opportunities for manufacturers to assess what marketplace conditions benefit them. The platform economy and rising customer expectations allow companies to utilize the intelligent everything world to your advantage.

With technological advancement in every industry, enabling product and service innovation, it's the people behind it that are most vital to success. The shortage of skilled workers negatively impacts your business performance, with a lack of resources and knowledge. Improving employee recruitment and retention, skills development, and equipping them with the technology tools to move your company forward is crucial. An average of 50 percent of businesses identified these areas of need, and are addressing them, according to IDC's Worldwide Talent Management Survey 2019.

End-to-End Service Lifecycle Management Trends & Opportunities

IDC's Pinder indicated that solving customer problems faster and growing revenue intelligently hinged on an organization's service lifecycle management (SLM) efforts. According to the IDC survey, the top 3 were:

  • Capturing and making available service knowledge and best practices
  • Increasing self-service revenue
  • Faster response to product quality issues and customer complaints.

Warranty management facilitates collaboration and value creation, improving the interaction between cross-functional teams, and increasing Net Promotor Scores (NPS) and Customer Satisfaction Scores (CSAT). To achieve this, 55% of companies surveyed indicated utilizing cloud-based systems adoption for Warranty and Recall Management.

Technology Accelerates Transformation and Service Excellence

The premise of becoming a digital company resonated throughout this presentation. The concept of moving beyond making your business digital (with IT-enabled business processes and services) to making digital your business (IT is the product; creating digitally enabled products and services) demonstrated the ideal path forward. This transformation starts with having digital technology in place to monitor and manage SLM. The IDC survey indicated 67 percent of manufacturers currently would soon utilize Artificial Intelligence (AI) and machine learning (ML) for SLM.

The Future of Service

Related to AI and ML, service needs continue to develop around Connected Warranty Management, remote and augmented services, equipment self-diagnosis, and Outcomes as a Service (OaaS).

The use cases for these capabilities include:

  • Customized dashboards and reporting
  • Automated Preventative Maintenance
  • Augmented / Virtual Reality Customer Support – Remote Expert to Customer
  • Outcome-based Service Contracts / Models
  • AI Intelligent Services
  • Training Services
  • Connected Products / IoT-Enabled Products
  • Closed Loop Innovation.

For a successfully reimagining SLM, Pinder's advice for Service Leaders and IT Buyers included keeping your focus on customer value, striving to deliver a consistent quality of service, and exploring innovative tools enabling a connected ecosystem. At the same time, your company transforms for a prosperous future.

Your Digital Service Lifecycle

Stuart Ransom of Mize highlighted customer expectations of product and service data's instant availability across the service lifecycle, extending from warranty management to product support Field Service Management, Service Parts Management, and logistics services.

Most companies (Yours?) typically have a maze of disconnected, interdependent service lifecycle systems, business processes, and service interactions that are not integrated. This disconnected service environment creates friction with customer engagement, limits product utility, impedes service delivery, and can result in a negative, and competitively undifferentiated Customer Experience.

To fix this, Ransom advised companies to create an implementation of customer-centric and service-first service delivery model. The Mize Connected Customer Experience Platform, will enable you to seamlessly share product data and orchestrate service interactions across the Warranty Service Contract Management lifecycle, and to all value chain participants, leveraging modern cloud and native mobile app technologies. Watch the on-demand webinar now to learn more.

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