Michael Blumberg offers us an exclusive analysis of the research he has recently conducted to identify trends amongst service organisations when it comes to service contract revenue that shows the secret is 'all about the asks'...

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 which in turn will help managers and executives become more effective in marketing and selling extended warranty/service programs.

A total of 96 service contract and warranty professionals have participated in our survey.  Just over two-thirds (68%) of the survey respondents were representative of the B2B segment. The remaining 32% were from the B2C segment.

 

Essential Key Performance Indicators Amongst Field Service Organisations

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 of 26% to 70%).  

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

 

Configuration

One of the key drives of successful Extended Warranty programs is Contract Configuration. This term, configuration refers 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 to date indicate the 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 that range in length between 1-2 years, while 52% have programs of 3-4 years in length.  The survey results suggest SC/EW programs have a shorter coverage period within 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. 

 

Customization

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 have some level of 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% in B2C.

 

Flexibility of Terms

Slightly less than half (48%) of the respondents surveyed indicate that they provide their customers with the ability to terminate their contracts after they are purchased.  Among those who allow early termination, the majority (58%) allow for termination with 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 service contracts. Higher attach and renewal rates were observed among companies who provide customers with the ability to negotiate.  This practice is more common within the B2B Segment.

 

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 as part of the SC/EW program:

• Spare Parts (64%)
• Advanced exchange/parts swap (54%)
• Onsite Field Service (82%)
• Depot Repair (50%)
• Remote Support (57%)

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%).

 

Frequency of 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 90 t0 76 days advanced notification. Two-thirds (68%) of respondents provide only 1-2 advanced notifications. The remaining 32% provide 3 or more notifications.  Higher Renewal Rates are observed among respondent who provide 3 or more notifications

 

Front Line Personnel & Automation

A majority (54.2%) 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 (46.2%) 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 sale by front line service personnel

 

Summary & Implications

In summary, 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 warranty. Just because customers purchase their product doesn’t mean that they’ll purchase the SC/EW.

As the survey results indicate, 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.

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Further Reading:

• Read more exclusive FSN articles by Michael Blumberg @ www.fieldservicenews.com/blog/author/michael-blumberg
• Read more about MIze @ www.fieldservicenews.com/blog/all-about-mize
• Read more about research into field service management @ research.fieldservicenews.com
• Read more about Service Innovation & Design @ www.fieldservicenews.com/blog/tag/service-innovation-and-design
• Connect with Michael Blumberg on LInkedIN @ www.linkedin.com/in/blumberg1/
• Folllow Mize on twitter @ twitter.com/mizecom
• Find out more about the solutions offered by Mize @ m-ize.com

Field Service News is in the middle of an in-depth global research project. As we reach the half way stage we share some of the initial findings including that cover three quarters of service companies see an opportunity to improve service delivery in the next 12 months...

The study is being conducted across three key global regions, EMEA, APAC and North America and is run in partnership with WBR Asia, More Momentum and Field Service News. The aim of the research is to assess the global impact on the field service sector of the Covid-19 pandemic.

We all know that our industry has been hit harder by this crisis than anything we have faced before. However, if we are to plan both a speedy recovery, and mitigation of future challenges should we be hit by a second wave or another similar pandemic, we simply must understand in quantitate terms what that impact has been. 

As Peter Drucker famously stated, we cannot measure that which we do not manage. Now, more than ever before, is the time for strong management, strong leadership. So clear wide reaching data on that outlines the damage we have faced is crucial. 

While the survey is still running, already there are a number of emerging trends from companies as they react to the crisis

• 56% of companies see acquiring digital competencies and a establishing a service culture as the a critical success factor to thrive in the upcoming disruption
• 71% are enhancing their service sales model and capabilities
  • However, only 25% are developing their earnings or pricing model
• 83% of companies see opportunities today to increase efficiency of service delivery, hence improving the margins
• 50% see growth opportunities for services focusing on operational solutions for their clients, beyond product related services

We are seeking to build as accurate a picture as possible which will be distilled into a detailed report for the industry. The report will be available for purchase at a price of $195. However,  all participants within the research will be given a complimentary of this report. 

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If you would wish to be part of this project and claim a free copy of the report as a participant then you do so by clicking this link

Field Service News Research identifies trends amongst field service organisations and the Internet of Things when it comes to the KPIs...

A recent Field Service News Research has taken a deep look into how field service companies are continuing face up to the challenge of harnessing the vast amounts of data they are accessing each day... 

 

The Growing Dual Challenges of Data in Field Service... 

In a recent article for Field Service News Research, Kris Oldland explored some of the key findings their current research into the use of KPIs amongst field service organisations has revealed when it comes to analysing,  interpreting and reacting to data...

"In today’s connected world, there is just simply so much data being created that we are very much in danger of being overwhelmed and consumed by it unless we are not careful." Oldland wrote. 

"Paralysis by analysis can be a genuine issue that can stifle innovation. In a customer-orientated world, the ability to adapt quickly is becoming a crucial aspect of modern business. Yet, at the same time, so is the increasingly hackneyed phrase ‘data is the new gold’."

"The ability to be able to monitor, measure and then dissect each aspect of our operation - whether it be internally within our teams and operations or externally with regards to our customer interactions, can offer us the ability to leverage vast amounts of untapped insight into our businesses that can literally open up new revenue streams, or at least maximise to the fullest potential those we already have in place," he continues.

Some of the headline findings within the research which Oldland explored within the article include: 

• 67% of field service companies are now using IoT to provide data from assets in the field.
• 72% of these companies are using data from connected assets to predict failure and schedule maintenance around this data
• 54% of these companies can interpret data from assets in the field when providing triage
• 23% of these companies factor this data into the way they analyse field service KPIs

 

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To find out more and also discover the impact of servitization on the KPIs field service companies are measuring check out the latest analysis from Field Service News Research visit https://research.fieldservicenews.com/drownin-in-data-or-gold

Project to be facilitated by Noventum Service Management and will focus on service-business models.

HSO has announced a research project with Microsoft to look into future service-business models.

The project will hone in on digitilasation as an enabler for new business models and how it affects increasing customer demands.
To enhance their findings research partner Noventum are looking for feedback from the service sector on the topic and have created a survey for participants to contribute, which you can do here. Those who take part will receive a full report of the project's findings.

Field Service News research reveals a trend for increasing the numbers of service related KPIs... 

A recent Field Service News Research has revealed that while those measuring more KPIs than the average are currently in the minority, the data suggests they are perhaps slightly ahead of the curve. Indeed, just under half of the respondent companies (44%) stated that they had increased the number of field service related KPIs that they were tracking - but the crucial question is why?

The rapid evolution of field service management

As one respondent explained during a follow up interview around the research findings, “The simple fact is that from within a field service operations perspective, we have moved relatively quickly from occupying a space where customer satisfaction was something that was a by-product of what we were generally measured upon, an after-thought to an extent, to become a primary measure of the success of not just the field service operation but also the wider business itself.”

This insight reveals two things. Firstly, it highlights just how profound the broad shift we have seen in field service of the operation being primarily positioned as a cost centre to becoming a profit centre within its own P&L has been.

The findings of the research are both revealing and insightful and could provide a useful benchmark for any field service management professional who is trying to understand how best to monitor their field service operations. As Peter Drucker famously once said "you cannot manage what you do not measure". 

 

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To find out more and also discover the impact of servitization on the KPIs field service companies are measuring check out the latest analysis from Field Service News Research visit https://research.fieldservicenews.com/why-the-numbers-of-kpis-field-service-companies-monitor-are-changing

 

 

 

 

Research shows increase in fleet management systems in both countries.

We can only manage what we measure as the old adage goes. But in  dynamically evolving environment such as we find our selves in today the question as to what exactly it is we should be measuring in order to manage our field service operations may be up for some debate. 

Michael Blumberg reveals some of the key findings of the latest research into field service Scheduling and Dispatch to come out of Blumberg Associates...

A critical success factor in managing a Field Service Organization (FSO) is the ability to effectively schedule and dispatch field service engineers (FSEs).

It is about making sure that technicians arrive at the customers’ site at the right time with the proper tools, knowledge, and resources to resolve the problem during their initial visit.

First Time Fix is the name of the game in field service. FSOs run the risk of incurring additional costs and damaging their customer satisfaction any time their First Time Fix target is in jeopardy.

There’s a lot at stake for FSOs when it comes to effectively scheduling and dispatching FSEs. There are significant challenges for FSOs, particularly if many service visits are required each day, dispatching is made from a large pool of FSEs, and the FSO is financially penalized by the customer when response time commitments or Service Level Agreement (SLAs) are not met.

 

"First Time Fix is the name of the game in field service. FSOs run the risk of incurring additional costs and damaging their customer satisfaction any time their First Time Fix target is in jeopardy..."

 

Over the last 10-20 years, FSOs have turned to advanced tools and technology to automate the scheduling and dispatch process to improve this activity.

These tools range from appointment setting applications to dynamic scheduling software based on artificial intelligence and operations research algorithms.

To understand how these tools are deployed in the field as well their impact on service performance, Blumberg Advisory Group and Field Service Insights in conjunction with Timing Software conducted a benchmark study among 150 FSOs. In this article, we will examine the impact of automated appointment booking applications and dynamic scheduling functionality on performance.

Most FSOs had limited flexibility in their appointment booking process.

 

• 59% offered their customers the first available time slot while the remaining 40% provided their customer with alternative options
• Approximately half (49%) set appointments 5 days out or longer. This reflects that they have limited ability to handle emergency and/ or expedited requests.
• Less than one-third (30%) were capable of booking appointments 1 to 2 days in advance. However, nearly two-thirds (65.7%) utilized automation to help identify or locate available appointment times.
• Almost three-quarters relied on the automation supplied by their CRM/ERP software vendor.
• Less than 9% utilized a separate, best of breed scheduling solution for appointment booking, while the remaining depended on a customized system developed in-house.

 

FSOs who utilize automated appointment booking offer a better customer experience than those who do not.

There is a higher level of customer engagement because it provides the customer with options and a feeling of control when service is provided.

Companies that utilize this functionality are four times as likely to handle a 500 or more service requests per day and experience a higher FSE to Dispatcher ratio that those who do not.

The second step from booking an appointment is the actual scheduling of FSEs.

 

• One half assigned FSEs to customer sites based on their skill set, availability, and proximity.
• Remaining 50% either determined the schedule for their FSEs by dispatching the same FSE to the same site every time or assigned the same FSE to the same site having the FSE determine their own schedule.

 

Two-thirds of survey respondents utilized an automated process/system.

Approximately half (51%) used software that contains some type of algorithm which optimizes scheduling based on specific criteria (e.g., cost, travel time, etc.) or pre-defined factors. Less than one-third (31%) have a scheduling system on a rules-based engine. The remaining 17% have an AI based system that improves their scheduling process based on dynamic variables.

 

"FSEs who use automated scheduling software are 47% more likely to complete 5 or more service visits per day..."

 

The use of automated scheduling software has several benefits to FSOs. Our survey results indicate companies who utilize this type of software are 45% more likely to handle 100 or more service requests per day.

They are also 39% more likely to experience an SLA compliance rate of 90% or higher. In addition, they are twice as likely to have FSE rates of 85% or higher.

 

Furthermore, FSEs who use automated scheduling software are 47% more likely to complete 5 or more service visits per day.

Our findings suggest that appointment setting functionality plays a critical role in improving customer experience, increasing service productivity, and operating an efficient dispatch centre.

Automated scheduling software provides measurable improvements with respect to FSE productivity and efficiency. In the last year, 99% of FSOs surveyed incurred a financial penalty or were required to provide a customer rebate for missing SLA/response time targets. Almost half (45%) missed these targets more than 24 times last year.

The use of advanced tools and technology like automated booking and scheduling software will have a significant improvement in reducing or eliminating the frequency of these occurrences.

 

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Research analyst and consulting firm, Strategies For Growth^SM (SFG℠) has launched its fifth annual Warranty Chain Management (WCM) Benchmark Survey Update, and invites all Warranty Management professionals to participate. The 2019 WCM Survey will remain “live” on the Web through the end of the year.

According to SFG℠ president and principal consulting analyst, Bill Pollock, “The results of the 2018 survey revealed that nearly three-quarters (71%) of respondents believe effective warranty chain management to be at least 'very important' to the overall financial performance of the business, with just under a quarter (22%) believing it to be 'extremely important.'

[quote float="left"]All respondents that provide their e-mail address will receive a link for downloading a complimentary copy of the Executive Summary Analysts Take white paper immediately following the conference.[/quote] The results further revealed that this sense of importance continues to increase substantially, year-over-year, as one-quarter (25%) believed effective warranty chain management to be 'more important than one year ago,' compared to only 3% believing it to be 'less important' – a ratio of roughly 8:1 citing 'more important' over 'less important’. As such, we know the segment is based on a sound foundation that is getting stronger moving forward."

The final results of the current survey will be presented by Pollock at the 2019 Warranty Chain Management Conference, March 12 - 14, 2019, in Orlando, Florida. In addition, all respondents that provide their e-mail address will receive a link for downloading a complimentary copy of the Executive Summary Analysts Take white paper immediately following the conference.

The survey consists of a targeted, multiple choice questionnaire that should take less than 15 minutes to complete. All responses will remain strictly confidential, and will only be tabulated and reported in the aggregate.

Simply click on the following link to begin the survey, or, if you prefer, you may forward it to someone else in your organization to complete:

https://www.surveymonkey.com/r/WCM_19

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BTW - Be sure to watch in Q1, 2019 for Bill Pollock’s article in Field Service News that will provide the key executive-level results of the current survey.

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SFG℠ thanks you in advance for your participation!