service as a profit generator
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Service as a profit generator How to explore an untapped potential
ComEx
Commercial Excellence Forum, Copenhagen April 2014
2
Commercial Excellence Forum 2014
Meetings 2014
March 24, 2014
Marketing with Impact (Conference)*
April 25th, 2014
Service as profit generator
September 5th, 2014
Improve your customer engagement
Learn more about Commercial Excellence Forum
3
….but why focus on Service?
Commoditisation
Growth
Loyalty
Servicetazation
focus
Innovation
focus Cost focus
4
… and as markets develops the need for an increased focus on
Servicetization intensifies…
The process by which a manufacturer changes its business model to provide a holistic solution to the customer, helping the customer to improve its competitiveness, rather than just engaging in a single transaction through the sale of a physical product.
Increasing focus
on the
commercialization
of services
5
Industry best practice recommends that 4 specific elements should be in
place when accelerating the execution of Commercialisation of Services
Recognize That
You Are Already a
Service Company
1
• How do we currently sell
services across
business units and
countries?
• What are the best
practices inside our
organization?
• Which services can be
moved from free to fee?
Secure the Service
delivery organisation
2
• Which services are profit
drains or
moneymakers?
• How can we ensure
cost-efficient service
processes?
• How can we tailor
services to customers’
needs?
Engage the existing
sales force in the
Selling of Services
3
• Is our sales force ready
to promote services and
solutions along with
products?
• Can we explain the value
and ROI of our services
and solutions to
customers?
• Are we willing to move
to longer sales cycles?
Understand customer
processes and prepare
to move further up in
their supply chain
4
• Do we understand the
business context of our
prioritized segments
• Are our offerings
aligned with our
customers’ goals and
processes?
• Can we address their
problems holistically?
6
The combination of stagnant product demand and commoditization has
pushed economic value downstream into providing services & solutions
While the majority of companies perceive their own position to be that of a service and
solution provider, the maturity assessment* shows room for improvement in the execution
of this ambition
• Understand the
customer’s cost of
consumption or
value of service
• Price according to
customer value
created by service
offering/solution
57% integrate the
development of
services into their
strategic agenda
72% position themselves
as true service
and/or solution
provider
47% have an
established sales
process for
services
29% commercialize
segment specific
service
offerings/solution
Survey
insights 26% price their
service
offering/solution
based on
customer value
Best in
class
elements
• Communicate
products and
services in form of
solutions based on
customer needs
• Selling Service
sales force to
support the
company image
• Commercial
strategy formulates
clear initiatives on
service growth
• Services design is
an ongoing and
integrated process
in the commercial
development
• Established sales
process bridging
internal functions
for service
provision
• Sales process is
based on value
based selling tools
• Design service
offerings based on
close dialogue with
customers
• Guidelines to
prioritize customer
segments and
align offerings
32 respondents
• 59% manager level, 19% executive level, 19% subject
matter, 3% other)
• 31% industrial goods & services, 22% professional
services, 13% financial services, 13% life science, 6%
energy, 6% IT, media and telecom, 3% health care,
6% municipalities & organizations
• 72% global presence, 16% domestic presence, 6%
European presence, 6% Nordic presence
• 50% more than 5000 employees, 31% less than 5000
and more than 100, 19% less than 100 employees
*32 respondents (31% industrial goods & services, 22% professional services, 13% financial services, 13% life science, 6% energy, 6% IT, media and telecom, 3% health
care, 6% municipalities & organizations)
7
What can we learn from professional and financial service companies
and where do they have room for improvement
0
10
20
30
40
50
60
70
Services companies
Other industries
% of companies that assess themselves in the higher vs. the lower maturity stages of selected elements
8
The Service dilemma Customer specific services and the efficient service organization
• Service needs to be customer
specific
• The higher perceived value, the
higher possibility for sales
• Customer demands new
services
• Internal focus on efficiency
• Pressure standardize services
• Streamlining delivery models
Effective structures
External focus
Efficient structures
Internal focus
9
Service as part of the strategy - but still with room for improvement
72% of believe they position themselves as true
solution providers
…however, only 57% have formulated clear initiatives
as regards commersialising services
10
Service as part of the strategy - but still with room for improvement
…and 47% of respondents have service sales
processes documented and implemented
Only 29% of companies have
catgorized services according
to segments
…and only 26% price their services based on
outside-in perspective
11
Case
Food & Beverage Security
12
Background for project
FBS and the strategy
• FBS is a world leader in Health and Food protection.
• Sales subsidiaries an all EMEA countries that sell and deliver products and
services
• The strategy is to create customer value, protect food safety and improve
operational efficiency.
The Market
• EU and global legislation demand strict documentation.
• Customers act globally and demand the same level of service worldwide
• Customers are outsourcing services more and more
• Growing service demands have led to growing operating expenses.
• Products are easier to copy and become a commodity.
• The market situation is leading to intensive price competition on products
• FBS leads the way – we want to differentiate ourselves from competition.
• High potential for increasing income via service sales identified.
13
The Challenge up to now..
Today customers are unaware of our services and their value.
This must change – only visible service can act as a differentiator against
competitors.
The challenge in essence;
• Failure to grow sales in a consistent and
consolidated way.
• Market is not recognising the benefits of our
innovations
• The technical capability is not recognised by the
customer.
• The Service provision is reactive and subsequently,
inefficient.
14
Traditional Dialogue.
”You´re too expensive” ”We can match the price”
”You´re still too expensive” ”We can do more service”
”Your competitor does a lot of service” ”How much more service do you want?”
”Your competitor visit once per week” ”Do you want two days per week?”
• No clear guidelines for the sales representative to adopt.
• No Tools to enable service to be visible.
The subsequent decision criteria;
Price – Volume of service and not value
15
Change step 1;
Create transparency for customers and internally
Service
Service Defined In the SLA
Need to Record the delivery of the SLA Commitment.
• Service Reports.
• Activity logs
• Meeting Minutes
• Action Plans
Realise the Benefit of the Service Capability and
create a platform for Chargeable Service...
16
Change step 2
Categorize your services
• Group the services cross-borders
• Define basic services and
chargeable ones and related
guidelines
17
Change step 3
Establishing the negotiable service budget
Ne
go
tia
ble
Advanced Services
• Based on net sales and the contribution margin, a
negotiable service budget is established.
• “Something-for-Something principle.
• Services that are not covered by the negotiable
service budget must be charged for
18
Change step 4
Creating the right customer dialogue…..
The advantage;
We can deliver the facts …transparency for the Customer and ourselves…
Agreed Services (SLA) entered into
Service System
Entire service history is available
All providers (T.M.’s, PST’s, Applications,
EST’s) are aware of their assignments
We only do what is required.
Proof that Services are being carried out.
We ensure efficiency and dialogue around
the right services (quality)
19
Example….Case history
The Customer – Dairy Best
• FBS is sole supplier to one of the biggest UK Dairy with
relationship existing for more than 20 years. Sales are +2$ M p.a.
• We have been using service registration for several years.
• 3 year contract in an Open Tender.
• Competitor bid price 15% lower than FBS.
• We had to defend our position….
This is about retaining our customer, improving our Efficiency
and fuelling Growth
20
• 12 Sites with $1.45m spend with FBS – On Budget.
• 227 Service Activities totalling 539 hours.
• 14% of time used for identifying savings
• 62% of time used for General Services
e.g. Admin, meetings, training etc…
Data From Last 6 Months…
Operational Savings and Wastage
Value Identified $720,000 24.8% of annual
spend
Value Achieved $238,000 8% of annual spend
Questions to the Customer
• Is our Competitor prepared to reduce the Chemical Spend to match our Savings Record?
• How much more savings could we deliver if our activity could be re-directed.
N.B. Not increased
24
Outcome..
3 year Agreement Signed – no reduction in prices. FBS is
a Top 10 Supplier following internal Questionnaire.
Improved Efficiency via:
• Product substitution
• Charging for Service
– Training, CIP Diagnose, late deliveries
• Structured Service via Service System
14
Case
Grundfos
• Click to edit Master text styles
Best Practice Driven Global Sales Transformation
With Service Selling as a growth lever
Best Practice driven Global Sales Transformation2009-2014
Na
ture
of
task
s &
ass
ign
me
nts
Operational: Tools
Tactical: Initiatives
Strategic:Projects
Measure of success
Satisfaction Local impact
Global ROI
Building the basics
Building specific
capabilities
Building customer
fanaticism
From operational tools to global impact
Na
ture
of
inte
ract
ion
Consulting, project design and
implementation
Project support and follow-up
Distant HQ function and short workshops
Building growth
enablers
Sales Excellence
Sales Force
Excellence
Face time
Boomerang
2
Commercial Excellence Forum 2014
Meetings 2014
March 24, 2014
Marketing with Impact (Conference)*
April 25th, 2014
Service as profit generator
September 5th, 2014
Improve your customer engagement
Learn more about Commercial Excellence Forum
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