"We support Customers avoiding risks when improving" |
Real life product sales quotes:
“My Customers don't want to hear about possible brake downs when buying our excellent products”
“If you want me to sell services it will reduce product sales”
“The Customer can't see the value in the service offering”
“Services are too expensive”
“Proposing services takes ages, I have to contact the service manager ...”
“Selling services on new products is a nightmare”
“The competitor isn't offering services which makes our offering more expensive”
What's Your focus?
Other messages:
Proactive service delivery / Operational excellence 2.0 (a 15 page paper)
Successfully selling service when the product is sold is not just a very good revenue generator, it is your best Customer retention opportunity
Best practice companies are always bundling Customer service when selling their equipment with success rates very close to 100%. More than 9 out of 10 companies have tried and failed.
They fail as they didn’t correctly identify, design and implement all required components of the solution (easy to sell offering, pricing, value propositions, way of selling, sales support, role description, incentive model, measurements…) or didn’t get the pre-requisites in place (business case, management commitment, change mandate …).
You will only do this change in your company one time. Once you have achieved it, the experience is basically useless as you never will do it again. This applies to all companies and as it happens so seldom, very little in-house experience exists. Without experience you have to invent the solution, try it small scale, improve it and try it again in larger scale etc. This “trial and error” takes a lot of time and can be very risky.
Balder Consulting has this experience from:
- 3 different industries where we achieved 100% service contracts sold when the product/solution was sold, by the product/solution sales rep. This during our line careers.
- We have assisted Customers to significantly improve their “attachment rate” in assignments.
- We have interacted with a large number of manufacturing companies, in our knowledge sharing workshops. They are struggling with this opportunity and we got a lot of findings in the area, especially mistakes to avoid.
… and we have consolidated our experience into world class models, key success factors and best approach methodologies benefitting our Customers.
1+1=3. If we marry your expertise of your company and your Customers with our experience, we can achieve significant attachment rate improvements. You will increase revenues with less investments.
If we are assigned to manage the joint initiative, we are able to guarantee the service sales growth and be paid by a fraction of the result.
Contact me to further discuss Your opportunity.
Lennart Neujd, CEO Balder Consulting
Email: lennart.neujd@balderconsulting.com
Mobile:+46-707 894 887
Developed companies sell services successfully together with new products sales. It is difficult to achieve. If you have the ambition to improve we can support you and guarantee results.
Manufacturing companies are experts in their products but still there are many products sold, where the Customer have to figure out how to manage and maintain the product themselves. Very few manufacturers are providing the lion part of the services that their Customers need and the most important mile stone in an individual product life cycle is when the product is sold. At that specific time the manufacturer has the opportunity to become the partner of the Customer taking care of the product throughout its whole life time and at the end ensure replacement. Otherwise they force the Customer to find another service solution.
It is very difficult to reach attachment rates (penetration of services sold with new products) close to 100% … so why bother? Why is it so important to sell services together with the equipment?
There are good answers to that question:
It represents one of the most important service business growth contributors- Customers are asking for solutions serving their opportunities or solving their problems. They don’t need just a product – they need a solution, which supports them creating more value in their core business.
- Selling service direct from the start stops the Customer from seeking other service solutions
- It is the most efficient way to sell equipment related services TOGETHER with the product (one sales cycle instead of two)
- The more service contracts sold already when the product is sold – the more Customers to manage, keep happy and retain for very profitable business.
So, what is the disadvantage of selling services together with the equipment?
It needs design of the new way of working (offering, agreement, incentives, training, etc.) and that new way of working needs to be implemented in all the sales units … which are proven to be very difficult change management initiatives.
But the reward is tremendous. We have seen companies moving from 10-30% attachment rate to close to 100% and their service business has doubled. (They have done other service sales improvements too, but the service attachment to product sales is the most important contributor).
Increasing attachment rate drives the cultural change from being a “box shifter” to a “solution provider” on the market also creating the increased internal awareness around the importance of Customer service.
Why is it so difficult for companies to increase the attachment rate?
It is a “once in a lifetime” change for any company so experience is limited. Many things need to be considered, prepared and changed. We have supported Customers with the ambition to increase their attachment rate. Let us share some of the key success factors:
Objective: Ensure top management commitment on attachment rate targets
Mandate: Establish mandate to change product sales people behaviour
Offering: Develop service offering that fits this particular service sales channel
Design: Design and verify new way of working, with sales organization (including possible IT changes in proposal, pricing, targeting, profitability analysis solutions)
Implementation: Develop change management support together with HR
Easy to use: Secure the easiness of the solution provided to product sales people
Warranty: Define the warranty scope to support day one maintenance contracts
Change method: Select and drive the change using a "change vehicle"
So if I address these success factors, will I be successful?
As said, there are many companies having tried to make a good service sales attachment solution, and they have failed because they haven’t considered all aspects of the “new way of working”. There is a risk of failure when designing the new solution for the first time leading to delays or failures with significant lost revenue.
It is common knowledge that changing the behaviour of many sales people is very risky. The top 10% do not need any effort at all because they are already selling service together with the product and the bottom 10% will never change, succeeding swiftly with the middle 80% is where the difference is made.
If this change initiative is not done in the right way, it will be stalling for several years with just minor improvements. The initiative needs focus, experience and time, which are not always available. This is not only delaying the recurrent service revenue but also delaying other change initiatives and affects people satisfaction.
Isn’t this just theory? Is it really so many companies struggling in this area?
We have met service managers from many manufacturing companies in Europe and our view is that more than 9 out of 10 manufacturing companies are trying (or have tried) to increase their attachment rate but not developing according to expectations. Let us share with you a case from reality:
To grow its service business, a company decided to improve its attachment rate of service contracts sold when the product was sold. When starting they sold seven service contracts for every 100 product sold. The average value of the service contracts was about €3,000 per year and average product sales were in the range of 8,000 units per year. After years of struggling, the company realized that it was not even close to its target of a 50-per-cent attachment rate and had totally failed to plan and execute the initiative. The revenue lost was around €10 million per year of recurrent, irrecoverable revenue, according to the customer.
What is your recommendation, how should we increase the attachment rate?
So many are trying and failing, it is a difficult change, but it is indeed achievable and we know how. Instead of losing revenue we recommend that you buy the temporary knowledge and experience for this, “once in a lifetime” change, at a fraction of the loss.
We strongly believe that if you are going to build a house for the first time you better have someone in the project that have built houses before. In other words, we suggest that you make sure that you have experience from previous similar projects, with the objective to change the behaviour of many sales people in a matrix organization, in your project.
If you do not have the experience in-house we have it. Let us show how we could support you to increase the attachment rate and stop losing service revenue. You can leverage our experience when:
- Paving the way, i.e. establishing all pre-conditions required for success
- Setting up the project in the right way (planning, targets, resources)
- Designing the best “new way of working” fitting Your specific needs
- Deciding on what change support will be designed to support the implementation of the units
- Selecting and designing the best way of implementing the change
Next step?
Do you want to make a substantial revenue improvement already within a year? Let's discuss your specific situation in a meeting, no strings attached.
Contact me to further discuss Your opportunity.
Lennart Neujd, CEO Balder Consulting.
Email: lennart.neujd@balderconsulting.com
Mobile:+46-707 894 887