Differentiating Your Service Organization in a Competitive Economy

Beginning of year predictions often focus on new technology and this year the consensus seems to be around the Internet of Things, wearable devices, and 3D printing.

All three are gaining momentum in the consumer products space, and their adoption across the enterprise—in service and manufacturing organizations—will depend on the competitive advantages they offer.

Given the higher margins on service and the impact of service delivery on customer retention and customer lifecycle value, there is a great deal of competition within the industry. To a certain extent, competition is fueling innovation and generating new service offerings, but it is also driving down prices and placing extreme pressure on service margins.

New research by The Service Council (TSC) confirms that increasing competition is the top challenge service and manufacturing organizations will face in 2014.

Competition in service isn’t a new phenomenon. In 2013 many organizations stated that increased competition was their biggest challenge. What we’re seeing though is an increased competitive environment from a variety of organizations, the primary of which are:

  • Other OEMs
  • Third-party service organizations
  • Dealers and network partners

For the first group, taking over service oversight of other equipment is a value and convenience play intended to reduce the overall service vendors that a customer has to work with. For third-party organizations, it is mostly a price play wherein these organizations serve to offer labor, parts, and more at a much discounted price vis-à-vis supported OEMs.

As a result, manufacturers and OEMs are facing a strategic decision with regards to their service relationships. The need to differentiate is very real, but there are two primary paths to differentiation:

  • Delivering improved customer value
  • Lowering price and focusing on increased internal productivity

While some elements of both can be incorporated in a customer management strategy, the two philosophies are very different. The path chosen impacts the decisions that these organizations will take with regards to investments in various service functions such as field service, service parts and the contact center. It will also impact the type of talent that is sought after to support service delivery. One strategy is customer focused and the other is cost focused. While both might support short-term profitability, the customer-value strategy is the one that needs to be incorporated to support long-term growth.

In support of such a strategy, here are several themes that will be pertinent in 2014:

  • Customer segmentation and account management for service customers
  • Customer value discussions and reporting
  • Innovation in the development of new service delivery and consumption options
  • Workforce development
  • Formalized voice of the customer programs

From a technology point-of-view, a differentiation plan will raise interest in the following tools:

  • Analytics
  • Remote services and M2M
  • Mobile functionality
  • For field workers – improved resolution information and field based quoting tools
  • For customers – self-service applications to log issues, seek resolution and track activity
  • Knowledge management

In addition to the topics mentioned above, the fight for talent in service will take center stage on a global scale as organizations look for front-line agents, managers, and business leaders to executive on their customer-centric strategies.

Check back in with The Service Council for additional reports and research resources on service business trends in 2014.

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