Customer Services. Greg Sebasky CEO Global Customer Services

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1 Customer Services Greg Sebasky CEO Global Customer Services

2 Agenda Growth Levers and Potential Customer Satisfaction Expanding Margins and Service Capability Conclusion

3 Customer Services Financial Trends (CAGR 03-05*) 19% 18% % Growth 6% Revenue EBIT Order Book Margin expansion more robust than revenue growth * Constant Currency 3

4 Services Growth Levers Upgrades & New Services % Growth Installed Base Price Erosion Contract Penetration Installed based growth, contract penetration growth, and new services are drivers of top-line 4

5 Regional Market Size and Share - Services 2005 Market Size & Share % 28% 12% NA EMEA Equipment Share 23% 25% 15% Source: Philips Corporate Marketing Model (2005) Under penetrated in NA and APAC relation to equipment share APAC 5

6 Service Revenue Growth Drivers 2005 Global Revenue Contract Penetration Improvement ( ) Time & Material 18% VAS 8% Contracts 74% Contracts Value-Added Services & Upgrades Time & Material GXR CV MR NM CT US Total Note: 100 = contract penetration % 2005 Contract Annual Realized Price: Typically 6-9% of Equipment Purchase Price Higher Value Services Offer Opportunity to up Sell Contracts Installed Base growth and contract penetration increase opportunity across all product lines

7 Regional Market Relative Growth - Services 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Market Growth (3 -Year CAGR ) NA EMEA APAC LATAM WW Philips 6-7% 5-6% 14-16% 6-8% 7-8% Grow services faster than the market 6

8 Agenda Growth Levers and Potential Customer Satisfaction Expanding Margins and Service Capability Conclusion

9 Reasons Why Customers Recommend Philips to their Peers Service Service Experience Products Quality Reliability Technology Sales Ease of use Relationship Price Other Relationship Other Number of Comments Source: SuAzio 2005 Philips sponsored study Service ranks highest among reasons customers recommend Philips

10 Customer Satisfaction Philips Consistently #1 Source: IMV ServiceTrak 2005 Outstanding track record in two product categories 10

11 Satisfaction with Service % Very Satisfied or Higher 68% 67% 66% 65% 64% 63% 62% 61% 60% 59% Philips vs Competition Philips Competition 66% 62% Q3'05 Q4'05 Q1'06 Source: Q1 Customer Preference Tracking Study Survey Participants: 1,683 Philips moving ahead based on Q1 surveys 11

12 Certification Partnering with Continuing Education Units for Radiology Tech s Over 80,000 Registered Users of Philips Online Learning Center Key Partner and Significant Provider of Online Education to the ASRT, Membership 115,000+ Addresses Critical Continuing Education Need in Healthcare Online Courses Delivered Philips partners with key users to build brand loyalty 12

13 Agenda Growth Levers and Potential Customer Satisfaction Expanding Margins and Service Capability Conclusion

14 CUSTOMerCARE Center Deployment Main Centers Satellites Improving customer facing processes and systems across the globe covering 90% of sales volume Improving Customer Facing Processes and Systems across the Globe

15 Remote Services Network (RSN) Number of connected Systems 26,000* Number of connected Health Care Facilities 9,000 17, Apr 2006 Target , Apr 2006 Target 2007 Penetration beginning to show significant positive EBIT impact

16 Tracking the Heartbeat of our Solutions Implementing Intelligent Device Management (IDM) Solution on Several New Products for Release in 2006 Enables Real-Time Monitoring to Reduce Resolution Time and Prevent System Failures - Resulting in Increased Uptime New Technology is Foundation for Several Value-Added Services 24x7 Monitoring Hospital A Hospital B Internet PHILIPS CUSTOMerCARE System Utilization Reports Application Training & Support Hospital C Real-Time Connection via Heartbeat Software Updates Advancing service levels on our remote services network 16

17 Field Service Engineer (FSE) Productivity + Onsite Response Time + First Time Fix + SLA Compliance + Jobs/FSE/Day + FSE Utilization Real-Time Scheduling Optimization Mobile Work Order Management & Asset Maintenance Mobile Field Management e-learning Mobile Knowledge Management Productivity investments driving customer satisfaction and gross margin improvements

18 Spare Parts Supply Chain: UPS Outsourcing Today: 12 Logistics Providers CDC CDC ~ 10% Savings LDC LDC LDC FSE Cust FSE Cust FSE Cust Country A Country B Country C Future: 1 Logistics Provider / No Boundaries CDC CDC LDC FSE FSE Cust Country A Country C Benefits Summary Cost Savings Improved / Standardized Processes Focus on Core Competency Consolidate Inventory Improved Service Levels Timing Initial Roll Out Scheduled for June 06 Realization/Optimization Completed by 08 Outsourcing physical network will simplify processes, improve global performance, and reduce cost 18

19 Service Parts Supply Chain: Process Redesign World Class Partners Fix the Basic The Redesign Plan This year FY07 FY08 Service Level Segmentation Improved Fulfillment Process incl. Same Day Delivery Service Parts Optimization Logistics Cost Logistics Network 12 to 1 Logistics Provider Parts Planning & Parts Inventory Driving Value Sustained Performance Vendor Warranty Recovery Optimization Repair Supplier Network Direct Returns to Repair Service Revenue Operating Expense 10-15% Working Capital ~10% Agile supply chain supports selling higher margin services at lower cost

20 Agenda Growth Levers and Potential Customer Satisfaction Expanding Margins and Service Capability Conclusion

21 Conclusion Installed Base and Contract Penetration Opportunity Offers Excellent Potential for Growth Customer Loyalty Leadership Continues to be our Key Focus Acceleration of Process and System Initiatives Yields Significant Improvements: Service Levels Margin and Asset Efficiency 21

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