There’s a great deal of upside revenue to be realized by increasing the number of for fee premium service contracts. It’s also a smart revenue protection strategy, as customers are increasingly challenging the value proposition of basic service levels and how they align with their changing priorities. When you put the same offer in front of customers year over year, they either expect to pay less for that same offer or will decide not to renew at all.
So, it behooves companies to have a compelling premium service offer to both protect its overall service contract revenue stream and reap the financial rewards of the higher contract dollar values that premium offers provide.
At TSIA, we’re pleased to report that companies are making good progress moving their customers from a basic service level to a premium service level. Let’s explore 3 plays your company can leverage to enable the continuing trend.
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Sources: "2016 TSIA Emerging Offerings Survey"
and "2018 TSIA Service Offer Design and Launch Survey".
Play #1: The Role of Services Portfolio Management
It’s time to invest in a services portfolio manager. The industry is moving away from creating service offers in a silo (only Support offers) and reaching out across their organization to build converged service portfolios (Support + Professional Services + Education + Customer Success) that help customers achieve their desired outcomes. This is especially true for XaaS offers, where companies need to focus on adoption service attributes. This organizational convergence allows for:
- The ability to rationalize the existing service portfolio and create a service continuum
- Eliminates overlap in offers to reduce internal competition
- Provides a service offer design process that delivers value in new ways for customers
Play #2: Connecting Offers to Business Value
Designing service offers with a clear understanding of how a customer utilizes the technology allows you to connect to the business value you hope to create and this begins with segmenting customers into logical groupings. At its most basic, customer segmentation is the division of customers in a given market into discrete groups, and 76% of TSIA members use this methodology for assessing the size of the market opportunity.
76% of TSIA members segment their customers into logical groupings, allowing them to assess the size of the market opportunity.
And the data doesn’t lie. In TSIA’s 2018 Service Offer Design Survey, we asked companies if they tailored their service offers based on customer’s total company revenue (i.e. large companies vs. SMB), and the results were clear: Companies that segmented their offers were correlated to having more customers on premium levels of support.
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Moving customers to premium levels of service not only provide positive top-line revenue growth, but TSIA members report higher customer satisfaction and customer retention ratings, as well as strong net positive impact on support gross margins.
Another approach to understanding business value is through offer value journey mapping. This process helps to understand what specific offers a given customer should be consuming based on their current relationship with you. There are two anchors for this approach: company offers and business value. What specific offers do customers typically consume as they progress in their value relationship with the you?
Once you learn what’s happening in terms of business value for the customer, you can then use the information to include fee-based operational, adoption and/or informational services. For Service Revenue Generation members, we’ve created the “12 Layers of Value” to help you think through the value proposition of your premium support offerings and customer success plans, for both on-premise and XaaS business models.
The formula is simple: provide extraordinary value, deliver it incredibly well, and create positive financial impact for the customer.
Play #3: Packaging and Bundling Alternatives for New Service Offerings
Now that you have learned what value-based premium service offers to develop, you need to determine how to take them to market. There are a number of effective approaches to create the right balance of bundling versus a la carte options. An emerging practice is to include a points or credit program in the premium service offer.
What do these à la carte service offers look like and how do credit and points programs enable premium offers to keep pace with ever-changing customer priorities? Listen to our on-demand public webinar, “The Evolution of Premium Customer Success Services,” where Julia Stegman brings all of the concepts in this blog together. It’s only 30 minutes and you’ll gain a ton of information.
The formula is simple: provide extraordinary value, deliver it incredibly well, and create positive financial impact for the customer. This trifecta is sure to help in the success of moving customers to premium levels of service. If you’d like to continue the discussion, join us May 6-8 at Technology & Service World where Julia Stegman and myself will share research and data-backed best practices around creating premium service offers that deliver value to your customers.