Service Models – Service Management

Sustainable Service Models in Service Management

The concept of service used to be viewed as a liability for manufacturers, who regarded it simply as a function for keeping customers up and running. Now, value-added service models and bundled service-with-product solutions can become a recurring revenue stream.

New, more-complex service models are also emerging, and manufacturers are looking to provide services beyond the products they produce to include complementary and competitive products. Some of these new services include extended warranties and performance-based contracts, which guarantee maintenance and uptime for a fixed fee. Also included are built-in upgrades, online customer service, and spare parts. Along with providing extra revenue, these types of services create customer satisfaction and loyalty.

Sustainable Service Models

In Uncommon Service: How to Win by Putting Customers at the Core of Your Business, four truths act as the mental cornerstones of sustainable service models:

  1. You can’t be good at everything: Excellence requires underperforming on the dimensions your customers value least so that you can over-perform on the dimensions your customers value most.
  2. Someone has to pay for it: Service excellence must be funded in some way. You can find a palatable way to charge your customers more for it, reduce costs while improving your service experience, or get customers to do some of the work for you. Choosing among these strategies—finding the right funding mechanism for your business—will depend on both industry dynamics (e.g., price sensitivity) and the specific relationship you have with your customers.
  3. It’s not your employees’ fault: Your people matter, but not because they’re the make-or-break input on delivering uncommon service. Rather than creating an environment where employees have the time and space to focus on satisfying customers, many service organizations today are actually undermining their people’s ability to serve.
  4. You must manage your customers: You must be deliberate about involving your customers in creating — not just consuming — your service experience. Your customers need to play a productive role on the line itself, and to do so, they need training, guidance, safety goggles—and more.

Service leaders are building businesses that aren’t just looking to retain or satisfy their customers, but are actively seeking to maximize the share of wallet that they are capturing from their customers, whether in the form of renewed service contracts or the purchase of complementary value-added service models.

Having achieved excellence in service management from a customer-facing, operational, and financial perspective, best-in-class organizations have an eye toward the next step of service-led differentiation. While efficiencies can still be driven within the organization, growth in service will happen on the revenue side of the equation.