© 2009 Middlesex Consulting Group. All Rights Reserved Winning With Services & Support Boston Product Managers Association November 19, 2009 Sam Klaidman,

© 2009 Middlesex Consulting Group. All Rights Reserved

Winning With Services & Support

Boston Product Managers Association November 19, 2009

Boston Product Managers Association November 19, 2009

Sam Klaidman, Principal Adviser

Middlesex Consulting Group

[email protected]


Tonight’s agenda:

Are you missing revenue opportunities?

How service marketing is different from product marketing - and how are they similar

Issues associated with integrating product and service

Organizational

Business

Who's doing it - hardware and software businesses


Ted LevittMarketing Intangible Products and Product Intangibles, Harvard Business Review, reprint 81306

Ted LevittMarketing Intangible Products and Product Intangibles, Harvard Business Review, reprint 81306

“Marketing is concerned with getting and keeping customers”

But PM’s can’t really succeed without active partnering with Services


50K foot view ---> Underlying Assumption for Tonight

There are 2 reasons to integrate Products & Services:

1. Protect or enhance the value of the product business

2. Create a new growth business within the corporation

Tonight we will only discuss #1


WIIFMWIIFM

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.


WIIFM (Lets discuss these questions)WIIFM (Lets discuss these questions)

What % of your business comes from new customers, repeat customers and customer referrals & recommendations?

Can you survive and grow without repeat and referral business?

What influences repeat business more - product, price or service and support?

Are you measured (and compensated) on total product line revenue (and/or profit) or only product?

How did you make out in the last 2 years?

Wish you had an annuity stream?


Impact of Support on Loyalty


What Makes Services Different?What Makes Services Different?

The buyer purchases an intangible It's difficult to compare the quality of similar

services“Goods are produced, services are performed” John M. Rathwell, Marketing in the Service Sector, (Cambridge, Ma.;

Winthrop Publishers, 1974)

The service may be based on the reputation of a single person

The buyer cannot return the serviceVery easy to create a new product

The buyer purchases an intangible It's difficult to compare the quality of similar

services“Goods are produced, services are performed” John M. Rathwell, Marketing in the Service Sector, (Cambridge, Ma.;

Winthrop Publishers, 1974)

The service may be based on the reputation of a single person

The buyer cannot return the serviceVery easy to create a new product




Services Vs. Product Marketing Services Vs. Product Marketing (the p’s)(the p’s)Services Vs. Product Marketing Services Vs. Product Marketing (the p’s)(the p’s)

Products Services

Product Price Place Promotion People Physical Evidence Process


5 Fatal Flaws of Service Marketing5 Fatal Flaws of Service Marketing

Philosophy: Marketing is marketing (it isn’t!)

Structure: The wrong folks in charge or no one in charge

Pricing: By the pound, not by value Product Development: Created in the

conference room, not in the field Portfolio Management: Mostly a bag of

commodities, little differentiation




Basic Services Marketing Basic Services Marketing RolesRolesBasic Services Marketing Basic Services Marketing RolesRoles

Warranty Terms (although it mayWarranty Terms (although it maybe the Product Managers job)be the Product Managers job)T&M Rates and PoliciesT&M Rates and PoliciesContractsContracts

TypesTypesPricePriceUnique Selling PropositionUnique Selling Proposition

Cross-selling/upselling - who & when?Cross-selling/upselling - who & when?Key Account PoliciesKey Account PoliciesCollateral & Trade Show SupportCollateral & Trade Show SupportTraining Product Sales ForceTraining Product Sales Force

Warranty Terms (although it mayWarranty Terms (although it maybe the Product Managers job)be the Product Managers job)T&M Rates and PoliciesT&M Rates and PoliciesContractsContracts

TypesTypesPricePriceUnique Selling PropositionUnique Selling Proposition

Cross-selling/upselling - who & when?Cross-selling/upselling - who & when?Key Account PoliciesKey Account PoliciesCollateral & Trade Show SupportCollateral & Trade Show SupportTraining Product Sales ForceTraining Product Sales Force




Key Services Marketing MetricsKey Services Marketing MetricsKey Services Marketing MetricsKey Services Marketing Metrics

Revenues - Can grow as must as 30% per yearRevenues - Can grow as must as 30% per year Profits - Services GM frequently 50% better Profits - Services GM frequently 50% better

than productsthan products Attachment rate - % product orders with Attachment rate - % product orders with

services sold at time of saleservices sold at time of sale Penetration rate - % installed base (excluding Penetration rate - % installed base (excluding

warranty) under contractwarranty) under contract Renewal rate - % expiring contracts renewedRenewal rate - % expiring contracts renewed Customer satisfaction by service product - Customer satisfaction by service product -

from loyalty surveysfrom loyalty surveys

Revenues - Can grow as must as 30% per yearRevenues - Can grow as must as 30% per year Profits - Services GM frequently 50% better Profits - Services GM frequently 50% better

than productsthan products Attachment rate - % product orders with Attachment rate - % product orders with

services sold at time of saleservices sold at time of sale Penetration rate - % installed base (excluding Penetration rate - % installed base (excluding

warranty) under contractwarranty) under contract Renewal rate - % expiring contracts renewedRenewal rate - % expiring contracts renewed Customer satisfaction by service product - Customer satisfaction by service product -

from loyalty surveysfrom loyalty surveys




Combined Product & Service Combined Product & Service MetricsMetricsCombined Product & Service Combined Product & Service MetricsMetrics

% product orders from % product orders from existing customers existing customers (repeat orders)(repeat orders)

% product orders from % product orders from existing customers existing customers (repeat orders)(repeat orders)



% new orders resulting from referrals from existing customers% of reference customers% revenue and profits from services


Organizational Issues Associated with Integrating Products and Services Marketing

Organizational Issues Associated with Integrating Products and Services Marketing

Ever try to initiate a high impact change?

Were you successful or disappointed? Why?

Is this a good time to stick your hand up and try something new?

Lets talk about doing it anyway


Actions to Drive Service Revenue - A Team Effort

Actions to Drive Service Revenue - A Team Effort


Focusing on Services May be a Big Change -3 Cases

Focusing on Services May be a Big Change -3 Cases

Company Stage Challenge Benefit

1. Start-up Bigger fish to fry

Avoid problems down the road

2. Growing with integrated sales force

Hard trying to separate product lines

Works best if don’t use factory based selling

3. Well established -independent divisions

Bigger than 1 PM can implement

Really great opportunity but not for tonight


It Takes Change ManagementIt Takes Change Management

Pre-sign up key players in effected departmentsPre-sign up key players in effected departments

Sales Finance ServiceMarcoms HR Marketin

gCollect baseline financial and operational performance data

Create Sales training collateral for either Product or Services Sales people

Survey/interview early customers


Business Issues to Plan to AddressBusiness Issues to Plan to AddressBusiness Issues to Plan to AddressBusiness Issues to Plan to Address

Service organization maturity

Ready to serve

Customer satisfaction & loyalty

Transition from free to fee

Pricing & discounting

Obstacles to selling services



Ready to Serve?Ready to Serve?

Does the Service organization have the capacity? People, time, leadership

Will their budget be OK? Can they train the people as needed? Will they be ready with information Does everyone believe?

Does the Service organization have the capacity? People, time, leadership

Will their budget be OK? Can they train the people as needed? Will they be ready with information Does everyone believe?




Customer Satisfaction & LoyaltyCustomer Satisfaction & LoyaltyCustomer Satisfaction & LoyaltyCustomer Satisfaction & Loyalty Does the organization survey Does the organization survey

customers for sat. & loyalty feedback?customers for sat. & loyalty feedback? How do they use they results?How do they use they results? What % of customers would definitely What % of customers would definitely

recommend the service organization? recommend the service organization? NPS? Good enough?NPS? Good enough?

Does the organization survey Does the organization survey customers for sat. & loyalty feedback?customers for sat. & loyalty feedback?

How do they use they results?How do they use they results? What % of customers would definitely What % of customers would definitely

recommend the service organization? recommend the service organization? NPS? Good enough?NPS? Good enough?


Other ChallengesOther Challenges

Transition From Free to Fee - Transition From Free to Fee - Will Will you now charge for something that you now charge for something that was free?was free?

Pricing & Discounting - Pricing & Discounting - Prices must be based on customer’s received (and perceived) value

Obstacles to Selling Services - Obstacles to Selling Services - Sales & Service people feel you are Sales & Service people feel you are ripping off the customerripping off the customer

Transition From Free to Fee - Transition From Free to Fee - Will Will you now charge for something that you now charge for something that was free?was free?

Pricing & Discounting - Pricing & Discounting - Prices must be based on customer’s received (and perceived) value

Obstacles to Selling Services - Obstacles to Selling Services - Sales & Service people feel you are Sales & Service people feel you are ripping off the customerripping off the customer


Examples of Successful Integration


Survey SaysSurvey Says


Who's Doing It?Who's Doing It?Who's Doing It?Who's Doing It?

Some software company examples - 2008

Name Total Revenue Service % Revenue

Service Margin

PTC $941,279,000 68.5% 57.4%

Pegasystems $161,949,000 68.5% 41.2%

Oracle $22,430,000,000 66.5% 66.6%

SAP $14,957,000,000 64.0% 68.2%

Progress Software

$493,500,000 62.1% 77.6%

Adobe $3,157,881,000 4.4% 39.4%

Median (100 public companies)

$93,108,000 54.4% 56.7%


Who's Doing It? - Xerox Sept. 2009Who's Doing It? - Xerox Sept. 2009Who's Doing It? - Xerox Sept. 2009Who's Doing It? - Xerox Sept. 2009

This is a big deal - ask your CFO


Who's Doing It? - Dell Sept. 2009Who's Doing It? - Dell Sept. 2009Who's Doing It? - Dell Sept. 2009Who's Doing It? - Dell Sept. 2009Dell’s pre-Perot total revenue = $61B


Who's Doing It? - HP - FY 2008Who's Doing It? - HP - FY 2008Who's Doing It? - HP - FY 2008Who's Doing It? - HP - FY 2008

Total HP revenue $118.4B

HP Service revenue $22.39B (18.9%)

HP Service excludes services associated with:

PC’s

Printers and document

Servers

IT Solutions

Financial Services


Professional ServicesProfessional ServicesProfessional ServicesProfessional Services

FinancingFinancing New lab designNew lab design Product Inspection ServicesProduct Inspection Services Validation & Compliance ServicesValidation & Compliance Services Implementation & Project ManagementImplementation & Project Management Software ServicesSoftware Services LIMS MigrationLIMS Migration Data Management SolutionsData Management Solutions Laboratory Productivity ServicesLaboratory Productivity Services

Benchmarking MetricsBenchmarking MetricsLab Management WorkshopsLab Management Workshops

Educational ServicesEducational Services Asset Management ServicesAsset Management Services Multi-vendor ServicesMulti-vendor Services

FinancingFinancing New lab designNew lab design Product Inspection ServicesProduct Inspection Services Validation & Compliance ServicesValidation & Compliance Services Implementation & Project ManagementImplementation & Project Management Software ServicesSoftware Services LIMS MigrationLIMS Migration Data Management SolutionsData Management Solutions Laboratory Productivity ServicesLaboratory Productivity Services

Benchmarking MetricsBenchmarking MetricsLab Management WorkshopsLab Management Workshops

Educational ServicesEducational Services Asset Management ServicesAsset Management Services Multi-vendor ServicesMulti-vendor Services


ResourcesResourcesResourcesResources

Expertise Name URLSoftware Service Benchmarks

Association of Support Professionals

Asponline.com

General Service & Support Info

Service & Support Professionals Association

Thesspa.org

Service Sales & Marketing Training

Hahn Consulting Hahnconsulting.com

Service Marketing Planning & Implementation

Middlesex Consulting Group

Middlesexconsulting.com


Thank You and Go For It!Thank You and Go For It!

For more info contact:Sam [email protected]



Documents

© 2009 Middlesex Consulting Group. All Rights Reserved Winning With Services & Support Boston Product Managers Association November 19, 2009 Sam Klaidman,