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

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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)

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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

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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

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Case

Food & Beverage Security

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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.

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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

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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...

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Change step 2

Categorize your services

• Group the services cross-borders

• Define basic services and

chargeable ones and related

guidelines

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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

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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

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• 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

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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

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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