Whatever our opinion of why we are in a recession it is obvious that customers want to reduce their costs, but maintain their service levels. One of the big issues is to understand exactly what the customer wants, and what they value – and then provide only what they value and convince the customer of the value and need for service.
Working with service operations over many years reveals clearly that the service propositions are not created around abilities; rather the SLAs in place are usually customer or industry-standard driven, and often do not represent the best deal for either the customer or the service operation. Figure 1 below illustrates an example of some of the standard offerings available; however, these are not propositions but are service models. These models only become propositions when they are designed to suit customer needs and fulfil the most effective ways of working for the supplier.
Figure 1
An example of good service is providing a customer with on-site engineers during periods of peak demand; obviously, failure of equipment will be most disastrous at peak periods so offering a low-cost option of sending failed units back to base for repair during quiet periods when spare equipment is available will be appreciated. There are many examples whereby close inspection of real customer needs can facilitate lower overall costs with higher overall services without requiring any changes to existing processes. However, there will also always be a number of opportunities to improve the performance of each model, where the danger lies is in assuming that there is only one way of reducing the costs of service.
Establishing a customer specific service proposition does provide the opportunity to look at the processes that make up each model and assess the opportunity to automate part of a process. A simple example is the use of menu-driven call-answering to direct calls to the right place, before connecting to a real person. Consideration has to be given to what is contained in the proposition on offer to the customer and what the customer values, for example certain advertisements boasting of always speaking to a real person has a value-add as well as incurring a cost. If a customer sees no value in talking to a real person, then in tough times the same customer might ask to speak to a machine or even use the internet in order to reduce their bill each month. Better (more customer focused) service for less is the result, but the supplier will be challenged to change the process without incurring additional costs.
Getting more from less is about working smarter not harder. A review of processes often discloses that there is nothing wrong with the process: the problem is that what could or should be automated is being done manually, or the processes are logical but based on what used to be and not what is currently happening. Duplication often means cost; utilising the wrong process is expensive and many companies do not know the real cost of the processes in use. Process maps, may be operational but evoke little or no confidence in what is actually done (except for the sake of audits – like instinctively slowing down when a police car is observed). Therefore risking that when the customer asks for a lower price, the response may be to slash costs to achieve the lower price, whereas the better option might be to change the process and agree with the customer what is available at the lower price – they may be happy to accept the lower offering to save money, and if it is exactly what is wanted the customer will not see it as a lowering of value. The customer given a clear proposition understands the price and most importantly feels the value. Figure 2 shows an example of how the cost of an individual service is determined by the configuration of the business processes which are selected according to the required service levels in the proposition; however this can only be effectively achieved with an accurate knowledge of the cost of the processes which provide a clear statement of what the customer is paying for and how much it costs.
Figure 2
Understanding the specific cost of the processes is hard to perceive for many reasons, but in part because operations have found it difficult to accurately assess what the engineer does. Current innovations have given more access to assess activities and highlight a high level of low value activity in both the field and the back office. The research (Mobilisation Benchmarking in the latest Buyers Guide) has shown that this can amount to nearly 50% of the time spent by an engineer and therefore the time spent to fix a customer is almost always the same across a whole team of engineers, although the product fix times may vary.
Many companies debate whether discretionary time is well spent or idled away; if engineers are not trained in ways of optimising time it may be poorly used.
Evidence shows that most companies have invested heavily in improving the efficiency of their engineers but not always their effectiveness i.e. getting them to site more efficiently but discovering they do not have the right part, or that a visit is unnecessary. It is not always easy to reduce low value time, and only through efficient use of the improved information available is such a possibility becoming a reality. It is important to realise that reducing low value time is not intended as a stick to beat engineers with – it should be regarded as an effective mechanism for improving processes and for reducing wasted time (abhorred by the engineer, the company and certainly by the customer). Most companies can easily start the exercise of delivering more for less through identifying where they are wasting the time of their engineers before they embark on significant process and efficiency drives aimed at increasing the number of visits per day, which will begin to happen if there is less wasted time.
The essential ingredient towards reducing the cost of service is to fully understand what the customer does and does not want. Increasing reliability of equipment has begun to have an effect on the customer resulting in reluctance to take out service contracts and instead hope there will be no breakdown. Of course once a breakdown occurs they expect the service they received as a contract customer.
Preventing the customer from stopping the contract is the first challenge, and in this case proactive measures will pay dividends. A good customer should be treated as one and served in a manner that will ensure their business: a poor customer requires a decision-making exercise for appropriate action to be taken – doing nothing is abdication. Proactively approaching the customer puts the supplier of services on the front foot and allows for the provision of a sound customer-based, relationship-building proposition. Being forced to react to a demand for cost reduction and then taking knee-jerk action can look like panic and undermine the fine balance of an established relationship.
Discussing with a customer where service can be trimmed must also be accompanied by a real understanding of what the customer wants to get from the service provided and which differentiates you against competitors, therefore how the subject is approached must appear professional and well thought through. A good starting point is to question whether needs have changed – for example a major installation of large capital goods equipment may no longer be used 24/7 and so a 2 hour response time is not relevant. A much more valuable exercise for the customer might be to undertake a full overhaul of the machines, one at a time, as capacity allows, over a series of months, with the latest updates included. Providing significant tangible value at a difficult time could give results for customer and supplier in terms of a far better use of the service team and ultimately create a much more loyal customer.
In summary therefore, to enable the most effective relationship with the customer, it is essential to have a deep understanding of the cost build-up of the processes that provide the service, and to have a clear knowledge of what costs money, what constitutes value for the customer and where there are opportunities to reduce costs. Approaching the customer with such knowledge will give insight into their current investment in service provision and an ability to bring a real value-adding proposition to the customer, who will be more likely to encourage a continuation of the service contract and a loyal customer. Of course there is no need to limit this detailed knowledge of your process costs to your existing customers and approaching customers of competitors with a really carefully thought-through offering could tempt them to ask their existing supplier for a better price. Even if you do not win the work you have ensured your competitors have to work harder because they will not have planned to work smarter.
Steve Downton has established a reputation for providing effective business advice within the Services Sector specialising in guiding senior management teams and supporting service operations both large and small to improve their performance profitability and deliver service excellence. steve.downton@downtonconsulting.com
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