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Copyright © 2003 Americas’ SAP Users’ Group Making a Profit with Customer Service David Baethke, Vice President, The Baer Group Wednesday, May 21, 2003
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Agenda Underlying Principle – Service Operations is and should be a line of business The business Plan will have multiple dimensions Act on the plan, invest in the business
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Principle
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Business is a Game Score is kept in dollars and share holder value Drivers to the score Customers Needs satisfied Happy Employees Empowered Trained Happy Product Innovative Serves market need
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Customer Satisfaction A customer ‘Very Satisfied’ is SIX times more likely to buy again as compared to the customer who simply reported ‘Satisfied’ Clear goal is to have ‘Very Satisfied’ customers From Harvard Business Review
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Customer Satisfaction – How it is Delivered People work with people People talk to, spend time with, buy from people they like and respect Sales gets initial contact and sales concluded Service spends a lot of time with customers Pre-sales - understanding and shaping solution Initial Installation – ensuring good initial usage Post sales – supporting and maintaining the solution over time
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Profitability vs. IT Spend in Service Operations From: AMR August 2002 Profitability vs. IT Spend in Service Operations
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Budget Revenue Independent Dependent Strategic Line of Business Profit Center Contribution Center Cost Center Provides a service to someone else; does not stand by itself but in support of another; runs against a budget; creates no revenue Provides a service to someone else; does not stand by itself but in support of another; may generate a small amount of profit Managed independently for the purpose of a business by itself; has most or full revenues Run by an executive, making their own choices and decisions regarding the abilities to best support products and generate revenues and profits directly from sales of services From: Service Innovations, Inc. Evolution of Service Business
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Dimensions
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Typical Service Operations World Inadequate senior executive representation A multitude of disparate systems Numerous customer databases Data integrity issues with installed base Must support a number of differing business processes Outsourcing of certain operations is common Under investment in technology Typical Service Operations World
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Business Unit Dimensions – Service Operations Revenue growth Cost optimization Service product portfolio Functional areas required to support a world class service operation Sales, marketing, delivery, logistics, financial and organizational elements to consider
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Service Operations - Big Picture Items Growing service revenue Service vs. product sales – support and execution Determination of service offerings Move into professional service offerings 360 view of customer Controlling service operations costs Improve first time fix rates Optimize field operations Optimize spare parts supply chain Service Operations - Big Picture Items
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Service Revenue Drivers Customer Needs Customer Budgets New Products Delivery of Service Products Market Changes New Technology Trends Contract Costs Parts Costs Labor Costs Training Costs Systems Costs Margin Requirements Service Revenue Sales Programs Sales Compensation Model Product Marketing Programs Service Products Product Pricing Installed Base Product Quality
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Major Service Processes Four major process areas comprising 20 individual processes Sales And Marketing Customer Support Logistics and Operations Product/Configuration Management
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Scope of Customer Service for a Product Based Service Offering Cost Revenue New product support NPI/strategy definition Feedback/Improve quality Joint product development Design Engineering & Product Marketing Pre-Sales & Order Entry Pre-Product Delivery Product Delivery & Install Post Support (Issues) Post After Sales Network Consulting Technology education Product training Scheduling commissioning 1 st – Call Center Support (FE+ Vendor+etc.) 2 nd – Fld Engineer 3 rd – Engineering/Mfg. Selling of service Trade-show support Limited demo support Product commissioning Product training Workflow consulting Call Center help Contract sales Service products More education/training Networking services/tools Preventative maintenance Scope of Customer Service for a Product Based Service Offering
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Service Lifecycle Short service lifecycle – 0-2 years ex. Personal Computers, Consumer Electronic, Semiconductors Moderate service lifecycle – 2-7 years ex. Cars, Medical Equipment, Business Servers, Office Telecommunications Equipment Long service lifecycle – 7+ years ex. Aircraft Engines, Industrial Equipment, Telecom Switching Equipment Service lifecycle differences will drive the priorities of the IT investments
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Act
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Services
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Common Investment Areas by Service Lifecycle Length Short lifecycle Inventory/Parts Planning Warranty/Claims Management Channel Management Moderate lifecycle Demand Visibility Service Order Management Customer Intelligence Long lifecycle Customer Intelligence Product Technical Documentation Inventory/Parts Planning Common Investment Areas by Service Lifecycle Length
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Challenges Shaping Services Industry Real-time enterprise through digital convergence Mobile business going wireless Value chain integration, organizational alignment Strategic sourcing – collaboration with partners CRM – remote diagnostics and monitoring Data storage, data mining and knowledge management Security Aggregating/brokerage of services, delivering complete solutions From AFSMI Sbusiness Journal Mar/Apr 2003
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Call for Action Principle - Drive to a service line P&L (play the game) Plan - Analyze and understand underlying product and service drivers and opportunities Develop a plan of attack Execute Act - Invest in the tools and technologies needed to support the service line business plan Links to customer care initiatives Learn all SAP has to offer its customers for service operations
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