Offering smart, connected products and monetizing IoT services requires a collaborative approach between Sales and Service teams across the board. The moats between Sales and Services need to be crossed, but to do this, organizations also need a blend of Marketing, Sales, and Service motions to maximize customer lifetime value.
Most manufacturers of smart, connected products, as well as industrial equipment and solutions providers, are generating the majority of their revenues through product sales. In this world, Sales owns the customer account and is focused on the “make, sell, ship, implement” aspect of products and solutions. Services to support the equipment and implement solutions are part of the product deal and are often discounted, or even free.
In TSIA’s Industrial 40 Index, we track the financial data of industrial equipment manufacturers, which includes product and service revenues and margins. We are seeing a clear trend: Revenues and the margins for products and services are under pressure. This indicates that commoditization is reaching equipment industries.
Through digital disruption, this commoditization will speed up as new entrants begin to swoop in to capture the value of the installed base. These new entrants see services for smart, connected products and adjacent software and information services as the core advantage, not the product itself. In fact, Vele Galovski and I talk about this in our ebook, “Why Services is the Big IoT Opportunity for Hardware Manufacturers.” Here's a brief excerpt:
A word of caution for product companies focusing on service efficiency and process optimization: there will always be someone else ready to swoop in and help your customers achieve their desired outcomes, from current competitors to new entrants. New entrants don’t play by the same rules, aren’t set in their ways with regard to legacy product definitions, and have no historical profit pools to protect, which makes them free to see full potential to capture value.
This means that product-attached services are not a dependable anchor for your organization.
Industrial equipment companies need revenue streams that are decoupled from product sales. However, most IE companies are still very product-centric, and are thereby missing the opportunity to leverage Service touchpoints to create additional and reliable revenue streams.
To maximize customer lifetime value, the potential opportunity that can be gained through Services needs to be considered from both the lead generation and sales processes, as well as the usage of products and services. To manage the customer lifetime value and the customer journey for products and technology services, TSIA developed the LAER model.
Landing customers with smart, connected products or smart services with adjacent solutions as well as reaching high CSAT scores after the implementation requires trust in a successful long-term relationship on both sides. While the LAER model covers the customer journey from the supplier perspective, the customer perspective of that same journey is referred to as the PIMO model, (Plan, Implement, Monitor, Optimize). Every deal should follow both of these roadmaps, but building the trust needed to create a reliable PIMO roadmap requires strong service engagement in the sales process.
Identifying the customer’s goals and agreeing to an adoption roadmap ensures the customer’s readiness and willingness to adopt your technology and to use it successfully. To ensure high adoption of the solution within the customer’s operating environment, a variety of support options like self-service, training, consulting, and embedded product support need to be provided. With an optimal adoption plan that leverages all of the touchpoints your company has with the customer, you pave the way for the potential to expand their spend and secure contract renewal.
Smart, connected products offer upsell opportunities with updates to improve the functionality and connectedness and new security levels. The software pieces and information services are subject to continued and permanent improvements. New or improved functionality creates new opportunities to offer consulting services as well, allowing your technologies to become established more deeply within a customer environment and operation. Additionally, this unlocks options for cross-sell by getting additional users within a customer account to use your products or platform.
Successful adoption and expansion is the best assurance to create stickiness for your products and services and ensure customers renew their contracts for support, software, cloud, and information services.
But in order to do this successfully, it’s crucial to overcome the turf wars between Sales and Service to create a strategic partnership for blending of service and sales motions.
Get best practices from your peers and industry thought leaders on how to speed up the implementation of a Service-centric customer journey at our upcoming Technology Services World conference, May 7-9 in San Diego. With our theme, “Blending Service and Sales Motions,” we will have a lot of inspiring discussions, including sessions by industrial equipment companies and TSIA researchers sharing their experience and knowledge. Here are just a few topics you can expect to learn about:
View the schedule online to see what we have in store. From Sales, to Services, to Marketing, and of course, C-level and above, there’s something for everyone at TSW. See you in San Diego!
Read more posts in the "Blending Service and Sales Motions" blog series:
Post Date: March 14, 2018
Professor Harald Kopp, is director, Industrial Services Research, for TSIA, as well as a teacher in a MBA program for sales and service engineering at Furtwangen University, Germany. His focus is chiefly on services in industrial automation, equipment, instruments and technology companies. He has 20 years of experience in the areas of research, consulting and management in industrial services, supply chain management, and IT-Management in industrial equipment, automotive and enterprise IT industries.
The Technology Services Industry Association (TSIA) is dedicated to helping services organizations large and small grow and advance in the technology industry. Find out how you can achieve success, too. Call us at (858) 674-5491 or we can call you.