State of Service Management: Outlook for 2013

Transcription

1 Is Service Run as a Prfit Center, Percentage f Respndents, n=138 State f Service Management: Outlk fr 2013 The transfrmatin f the service rganizatin, as tracked by Aberdeen's Service Management research ver the previus eight t 10 years, cntinues int This transfrmatin isn't limited t a mre prfit-centric view f service, but tuches upn the changing rle f the service rganizatin. N lnger is service just abut delivering supprt, but mre and mre it's abut a true understanding f custmer needs and the prvisin f slutins t ensure custmer delight, prfitability, and maximum value. In essence, the service rganizatin truly understands the custmer's pain pints and can rely n this infrmatin t maximize the value derived frm purchased prducts and services. This dcument will highlight trends in service management and fcus n the steps taken by the Best-in-Class in maximizing custmer satisfactin, retentin and verall prfitability. Being Custmer-Centric is Prfitable. Custmer service and custmer experience management are strategic areas f fcus fr rganizatins heading int These aren't grundbreaking predictins, as custmer-centricity has been and will always be a theme fr success. The real challenge cmes in balancing custmer-centricity with peratinal excellence t ensure that custmer needs are met withut breaking the bank. This is where the treatment f service as a prfit-centric business unit is essential (Figure 1). January 2013 Analyst Insight Aberdeen s Insights prvide the analyst perspective f the research as drawn frm an aggregated view f the research surveys, interviews, and data analysis Figure 1: Best-in-Class = Prfit-Centric View f Service 80% 72% 60% 56% 40% 38% 24% 20% 0% Yes N Best-in-Class All Others This dcument is the result f primary research perfrmed by Aberdeen Grup. Aberdeen Grup's methdlgies prvide fr bjective fact-based research and represent the best analysis available at the time f publicatin. Unless therwise nted, the entire cntents f this publicatin are cpyrighted by Aberdeen Grup, Inc. and may nt be reprduced, distributed, archived, r transmitted in any frm r by any means withut prir written cnsent by Aberdeen Grup, Inc.

2 Page 2 It's nt abut paying lip service t custmer service r marketing arund service prwess, but rather is mre abut develping a strategic plan arund the efficient delivery f service and supprt t custmers t imprve custmer satisfactin, enhance lyalty, and strengthen future revenue streams by truly understanding what custmers are unable t d themselves. Over the previus eight t 10 years, Aberdeen's Service Management research has traced the increasing fcus n service as an independent, prfit-centric business unit. In a recent survey f 138 service rganizatins, 58% highlighted that they treated service as a prfit center with prfit and lss bjectives in place. This percentage is slightly lwer than a similar state f the market survey cnducted by Aberdeen at the end f 2011, where 68% f rganizatins signaled their management f service as a prfit center. This drp highlights the fact that the transitin t a prfit-centric service mdel cntinues t face internal resistance (highlighted later), especially in the light f challenging ecnmic cnditins. That said, thse rganizatins that refuse t transitin will eventually realize that a prfit-centric service rganizatin is a key pillar f business sustainability, and here's why: It is cheaper t service and retain a custmer versus acquiring a new custmer. Fifty-ne percent (51%) f respndents indicate that the cst f service and custmer retentin is lwer than the cst f custmer acquisitin, with nly 15% stating the ppsite. While new custmer acquisitin and custmer grwth are vital elements f success, these gals need t be balanced with custmer retentin and custmer management bjectives. Margins n service are higher than thse n prducts. As seen in Figure 2, 45% f rganizatins claim that the margins n service are higher than thse n prducts. On average, rganizatins claim that the margins n service are 10.7% higher than thse n prducts wing t higher revenue streams at lwer csts (as seen in the preceding bullet pint).

3 Page 3 Figure 2: A Prfitable Venture 45% 40% 40% 35% Service Margins vs. Prduct Margins, Percentage f Respndents, n=138 30% 25% 20% 15% 23% 19% 10% 5% 5% 3% 0% Higher by 10% r mre Higher by less than 10% Same Lwer by less than 10% Lwer by 10% r mre Retained custmers make up a significant cmpnent f revenue streams. While service revenue accunts fr 26% f ttal cmpany revenue, as seen frm respndents t Aberdeen's State f the Market survey, existing custmers make up a significant cmpnent f ttal revenue. Organizatins reprt that retained custmers frm the end f 2011 made up mre than 80% f ttal revenues in 2012, tied t their spend n existing r newly intrduced prducts and services. Satisfied custmers significantly impact revenue grwth. Organizatins that were able t return a greater than 90% level f custmer satisfactin saw significant advantages in custmer retentin, lyalty, and verall revenue grwth cmpared t thse with satisfactin level f less than 50% (Table 1). While rganizatins have lng knwn that custmer-centricity is vital, they are nw able t understand the financial ramificatins f their custmer service strategies.

4 Page 4 Table 1: Satisfied and Cmmitted Custmers Lead t Revenue Grwth Metrics If the financial reasns utlined abve aren't enugh t justify a greater push int service, then external market cnditins might just d the trick. Fiftyfur percent (54%) f rganizatins see service as a means t fend ff cmpetitive pressures frm ther manufacturing r service rganizatins. In a tight ecnmic envirnment, custmers nt nly guard their ttal spend, but are als presented with a wider variety f ptins when cnsidering where t spend their mney (Figure 3). Imprved service and supprt can therefre serve as a strategic differentiatr in helping rganizatins fight ff lwer-priced prducts and services. Figure 3: Market Drivers fr Imprved Service in 2013 Cmpetitin in Prduct and Service Reduced Custmer Spending Glbal Ecnmic Uncertainty Custmer Satisfactin > 90% Average Result Custmer Satisfactin < 50% Custmer Retentin 89% 48% Custmer Lyalty Scre Revenue Grwth (Previus 12 Mnths) 3.7% -1.7% Service Revenue Grwth (Previus 12 Mnths) 6.1% -2.9% Service imprvement is ne thing, but imprving service perfrmance while delivering a prfit is anther. Therefre, Aberdeen's determinatin f Bestin-Class rganizatins in a cmprehensive service rganizatin review (such 45% 48% 54% 0% 20% 40% 60% 2013 Market Pressures, Percentage f Respndents, n=138 Insight: Benchmark Perfrmance While the fllwing metrics weren't used t determine Best-in-Class, these rganizatins revealed significant ut-perfrmance in cmparisn t All Others: SLA Cmpliance Best-in-Class 89% All Others 69% Cntract Renewal Best-in-Class 88% All Others 69% Serviceable Asset Uptime Best-in-Class 88% All Others 68% First-Time Fix Best-in-Class 71% All Others 59% Service Wrkfrce Utilizatin Best-in-Class 75% All Others 66%

5 Page 5 as this ne), includes strategic custmer-facing and prfitability metrics (Table 2). Organizatins were rewarded nt nly fr current perfrmance, but als fr their ability t imprve key metrics ver the previus 12 mnths. Table 2: The Tp Perfrmers Metrics Average Result Best-in-Class All Others Custmer Satisfactin 90% 69% Custmer Retentin 90% 68% Service Margins 40.2% 22.3% Service Revenue Change (Previus 12 Mnths) 12.1% 1.9% Service Cst Change (Previus 12 Mnths) -3.1% 2.0% This imprved prfitability, as seen in the Best-in-Class, is directly attributable t a disciplined apprach tward meeting and exceeding custmer expectatins regarding service, resulting in higher satisfactin and retentin rates which ultimately yield mre spend, and thus mre revenue fr the business. While metrics arund efficiency, utilizatin, and cmpliance weren't included in the Best-in-Class determinatin, it is evident frm the results (in the sidebar n page 4) that these are key areas f fcus fr leading rganizatins as they strive t imprve n custmer and financial results. It shuld als be nted that leading rganizatins have als been the mst successful in imprving custmer satisfactin ver the previus 12 mnths (8.0% vs. 3.9% fr All Others), further highlighting hw these rganizatins cntinue t invest in the imprvement f their service businesses. Outlk fr 2013 Fr Best-in-Class service rganizatins, the tp gal fr 2013 is t increase service revenues, as seen by 34% f leading respndents. Anther 24% are lking t imprve custmer satisfactin r retentin which is essential t attaining revenue grwth (as seen in Table 1). Only 19% f nn-best-in- Class rganizatins cite revenue grwth as their tp gal fr 2013, highlighting their cntinued fcus n imprving service perfrmance prir t establishing a fcus n revenue grwth. T attain revenue and custmer satisfactin bjectives, the Best-in-Class are priritizing the fllwing areas f fcus (Figure 4):

6 Page 6 Figure 4: The Path t Cntinued Success New Service Offering Develpment 55% Service Leadership 45% Integratin / Cllabratin 41% Knwledge Management 38% 0% 20% 40% 60% Areas f Fcus, Percentage f Best-in-Class Respndents New Service Offering Develpment and Management Since revenue has been and cntinues t be high n the Best-in-Class pririty list, these rganizatins are beginning t leverage the vast amunt f custmer data available thrugh service transactins t hne in n custmer pain pints and prvide slutins that maximize verall value. One example is frequent repairs n a particular prduct, which may alert the servicing rganizatin t a training r replacement issue that can imprve prduct perfrmance in the future. In this scenari, while the speed f repair is vital t the service experience, the prvisin f added insight r training services can ptentially remve r reduce the ccurrence f future issues, therefre reducing dwntime and maximizing custmer value. In additin, the prvisin f these services establishes the service rganizatin as a partner with the custmer, as ppsed t a transactinriented vendr. The identificatin f the need fr these services is ne thing, but the develpment f the infrastructure t successfully develp, administer and build revenue frm them is anther. As in the case f traditinal prduct develpment, successful service develpment requires an investment in the functins f sales, marketing, peratins supprt, and business analysis as well as in the autmatin f capabilities tied t service ffer creatin, billing, service cntract management, service renewal, and mre. The Best-in-Class recgnize this and cntinue t fcus n these areas fr investment frm a technlgy and persnnel perspective. In fact, 41% f the Best-in-Class indicate that Service sales is the functin that will receive the mst significant amunt f attentin frm an autmatin pint-f-view in the next 12 mnths. Insight: Autmatin Tp Functins fr Autmatin Investment in Next 12 Mnths (Percentage f Best-in-Class): Service sales - 41% Service marketing - 28% Technical infrmatin management - 28% Custmer feedback management - 24% Asset management - 21% Service cntracts - 21%

7 Page 7 Leadership A service leader (r grup f leaders) in the rle f the Chief Service Officer is essential t champin the cause and manage the grwth f a prfit-centric service rganizatin. Such a leader, with prfit and lss respnsibility, is necessary t ensure the transitin f the service rganizatin frm a lwest cst f delivery-type f business t ne that fcuses n value and prfit maximizatin. This shift requires fresight, investment, and executin; respnsibilities that can be verseen by the Chief Service Officer as ppsed t varius service functinal leaders (field service, parts, cntact center, etc.) Seventy-tw percent (72%) f Best-in-Class rganizatins have an executive leadership structure in place. These leaders are much mre likely t have: An independent service rganizatin as ppsed t ne reprting t peratins (62% vs. 49% fr All Others) Dedicated teams arund sales, marketing, IT, and prduct develpment fcused slely n service Table 3: Service-Centric Teams Dedicated Service Functins Currently in Place Best-in-Class All Others Operatins Supprt 59% 55% Sales 48% 41% Custmer Retentin 45% 31% IT 41% 32% Dedicated service teams can have a significant impact n business metrics. Organizatins with a dedicated service sales team in place experienced a 7.4% increase in service revenues ver the previus 12 mnths versus a 3.8% increase fr thse withut a dedicated service sales team. Integratin / Cllabratin and Knwledge Sharing Service leadership is als necessary t increase and imprve cllabratin acrss the enterprise. There are significant advantages when service wrks cllabratively with sales, marketing, prduct develpment, human resurces, and ther cunterparts. Cllabratin with sales can drive a mre cmplete picture f the custmer, which enables a better custmer experience. Cllabratin with design and prduct develpment can lead t a better understanding f service prcedures while als imprving prduct quality. Therefre it isn't surprising t see that service rganizatins are keen n cllabrating with ther rganizatinal grups t imprve perfrmance.

8 Page 8 Figure 5: Relying n Internal Partners fr Success Sales 67% Marketing 59% IT 58% Operatins 53% Prduct Develpment 48% Design/Engineering 41% Fr it t be successful, cllabratin can't just be tied t ad-hc data sharing, hwever. Fr true cllabratin t ccur acrss the rganizatin there needs t be; Systematic sharing f infrmatin between business grups Custmer infrmatin and histry Service transactin histry Asset / prduct perfrmance histry Custmer feedback C-develpment f prcesses 0% 20% 40% 60% 80% Internal Partners that are Mst Vital, Percentage f Respndents, n=138 Custmer management (service, sales and marketing) Service prcedures (Design, technical publicatins, and service) Quality assessment (Design, service, engineering, manufacturing) Wrkfrce management (Service and HR) Integratin f IT systems A cllabrative apprach is als ne that leading rganizatins supprt when budgeting and planning fr service autmatin prjects. Frty-eight percent (48%) f the Best-in-Class versus 31% f All Others plan and budget fr autmatin prjects via a jint taskfrce that invlves service leadership, IT, and finance. This ges a lng way tward ensuring that service autmatin needs are balanced and supprted by current IT standards, which leads t faster deplyment times, less custmizatin, and imprved Insight: IT fr Service Organizatins reprt that 27.7% f their IT budgets will be dedicated t service in Cmpared t 2012, this represents (percentage f respndents) An Increase - 33% The Same - 41% A Decrease - 6%

9 Page 9 Return n Investment (ROI). By incrprating finance, service leaders can establish a plan fr scalable slutin implementatin while als develping a financial mdel t measure and ascertain a true ROI. Table 4: Autmatin Pririties Slutins Priritized fr the Next 12 Mnths As seen in Table 4, priritized prjects fr the Best-in-Class tie int the key gals f revenue grwth and imprved custmer management. Business Intelligence and Remte Slutins prvide the means fr imprved data cllectin and analysis in rder t supprt newer revenue streams. Knwledge management tls can be used t imprve reslutin rates acrss the service enterprise while prmting better cllabratin. Likewise, custmer management systems can prvide the rganizatin with a single view f the custmer in rder t prmte an integrated experience acrss all custmer tuch pints. Service management systems can affrd business leaders with an integrated view f the entire service rganizatin, remving the need t rely n multiple and ften disparate systems t truly understand the reach and perfrmance f the entire service rganizatin. Summary Percentage f Best-in-Class Respndents The transitin t a prfit and slutin-centric service business isn't easy. In challenging ecnmic and cmpetitive climates, such as the ne we face nw, it is easy t view service as a cst center and t cut back n the tls and infrastructure necessary t supprt service business grwth (Figure 6). Percentage f All Respndents, n=138 Knwledge Management 41% 34% Business Intelligence 38% 29% End-t-End Service Management 34% 23% Custmer Relatinship Management 34% 33% Custmer Prtals 34% 28% Remte Service / Smart Services 24% 22%

10 Page 10 Figure 6: The Service Radblcks Ecnmic cncerns hindering service grwth 33% Cst cutting initiatives take precendent 33% Lack f budget fr investment in service 32% Current technlgy structure is insufficient 29% 0% 10% 20% 30% 40% Challenges, Percentage f all Respndents, n=138 Hwever, a cst-centric view f service is shrtsighted and ignres the rle that custmers play in ensuring business success. Best-in-Class rganizatins are upping their investment in service in spite f challenging ecnmic times, and cntinue t raise the visibility and stature f service within their rganizatins. As a result, these rganizatins are able t align themselves as slutin partners with custmers, enabling the develpment f a mre strategic, lng-term and prfitable relatinship.

11 Page 11 Fr mre infrmatin n this r ther research tpics, please visit Service Excellence and the Path t Business Transfrmatin; June 2012 Service t Services: Revenue and the Develpment f New Opprtunities; June 2012 State f Service Management: An Industry Perspective; March 2012 Related Research Service in 2012: The Cntinued Search fr Revenue; February 2012 State f Service Management: Frecast fr 2012; January 2012 Authr: Sumair Dutta, Vice President and Principal Analyst, Custmer Experience and Service Management (sumair.dutta@aberdeen.cm) Fr mre than tw decades, Aberdeen's research has been helping crpratins wrldwide becme Best-in-Class. Having benchmarked the perfrmance f mre than 644,000 cmpanies, Aberdeen is uniquely psitined t prvide rganizatins with the facts that matter the facts that enable cmpanies t get ahead and drive results. That's why ur research is relied n by mre than 2.5 millin readers in ver 40 cuntries, 90% f the Frtune 1,000, and 93% f the Technlgy 500. As a Harte-Hanks Cmpany, Aberdeen s research prvides insight and analysis t the Harte-Hanks cmmunity f lcal, reginal, natinal and internatinal marketing executives. Cmbined, we help ur custmers leverage the pwer f insight t deliver innvative multichannel marketing prgrams that drive business-changing results. Fr additinal infrmatin, visit Aberdeen r call (617) , r t learn mre abut Harte-Hanks, call (800) r g t This dcument is the result f primary research perfrmed by Aberdeen Grup. Aberdeen Grup's methdlgies prvide fr bjective fact-based research and represent the best analysis available at the time f publicatin. Unless therwise nted, the entire cntents f this publicatin are cpyrighted by Aberdeen Grup, Inc. and may nt be reprduced, distributed, archived, r transmitted in any frm r by any means withut prir written cnsent by Aberdeen Grup, Inc. (2012a)