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Service Revenue Generation
In the first part of this three part series, I discussed the top factors driving the shift to outcome-based offers, as well as the key capabilities required to be successful. Let’s dig a little deeper into how to get started, and in particular, how to surface the unmet needs of your customers.
Getting clarity on customer outcomes begins with segmenting customers into logical groupings. Customers can be segmented by vertical industry, by size of revenue, by role, by their purchase history, and many other ways.
Segmenting customers solves for:
It's okay to make some assumptions in order to get started — you can always prove or disprove these assumptions later.
Success can mean different things to different organizations, and the terminology, as well as key performance indicators (KPIs), can vary widely across industry verticals and roles within a company. For example, the KPIs a CIO in the manufacturing industry is responsible for might be very different from the CMO’s. The real question is, what metrics are your target audience trying to improve to drive better business performance? If you understand this, then you have a target to shoot for in terms of helping customers achieve their intended outcomes.
Recently, I spent time with one of our member companies and learned that many of their customers want to “improve productivity”, but each of their customers measure productivity differently. Before you can help deliver on customer outcomes, you must first take the ambiguity out of the elements they’re trying to measure, and get a solid grasp on how your customer quantifies improvement. This can be accomplished by engaging with customers to ask detailed questions about their business objectives. Once you’ve narrowed it down to specific metrics, you can then move forward with creating a plan of action to help your customers achieve their outcomes.
In these conversations with your customers, you’ll be able to get a clear picture of how they think about their business, along with the key metrics they measure and are committed to improve upon. To do this, you'll want to develop a Business Value Map to document and organize the core KPIs that matter most to a specific segment of your customers. You can create a Business Value Map for each customer segment in order to ground you and your service offer development team on the target outcomes.
Here's an example Business Value Map TSIA has created for the role of Chief Information Officer. You can see how CIOs define a number of metrics, including employee productivity. These specific metrics take ambiguity out and create a clear target as you develop new service offerings.
(Click image to enlarge.)
Develop a business value map.
Develop a business value map.
Having this visual plan can also be helpful to your marketing and sales teams when it’s time to go to market with your new offer.
So, how do we gain the knowledge to populate a Business Value Map? There are a couple of tactics:
As you begin to temporarily suspend focus on your products and think more broadly about outcomes, there’s no better resource to help you make the pivot to outcomes than your own customers. In our recent “Emerging Offerings” survey, we found that 77% of survey respondents make time to interview their customers. The objective of these interviews is to ask questions about the business objectives of customers and then simply listen — we’re not looking to problem solve or lead the witness, just hear what they have to say. I talked with a number of service marketing professionals within our membership and they were pleasantly surprised by how effective these interviews are with uncovering unmet customer needs.
Customers are more than willing to talk, if you'll listen.
Pamela Morgan, Juniper Networks
Here are just a few quick tips to help you begin conducting your own customer interviews:
Here are some sample questions for reference:
After the interviews have been conducted, collect the responses and identify the patterns across a customer segment.
The good news is, you don’t have to interview all of your customers to start seeing pattern recognition. A core sampling of 20 to 25 interviews will deliver intriguing patterns in terms of input to inform your new service offer development. It is through active listening and digging deeper with secondary questions that will help you answer the following questions:
This is the beginning of the pivot from product-attached services to developing outcome-based services.
The most important part of this process is taking the first step — you just have to jump in and get started. You’ll find that many of your customers will actively want to help you help them, so don’t be afraid to engage them and listen to what they have to say.
Insights from interviewing customers and identifying common unmet needs within a customer segment will give you the confidence to pilot new outcome-based service offers.
If you need more suggestions for good questions to ask your customers, or just want some words of encouragement from someone who’s seen many companies successfully come through the other side of this transition first hand, feel free to drop me a line. You can do it, the key is just taking that first step!
Stay tuned for part three in this series, where I will be talking about adoption services and how you can charge for them.
Read other posts in the "How to Connect Your Service Offers to Business Value" series:
Post Date: July 7, 2015
Julia Stegman, is the former vice president of research, Service Revenue Generation, for TSIA and was with the company for 7 years. She has over 25 years of experience in the high-technology industry, and was responsible for driving the TSIA research agenda related to the growth of maintenance, SaaS, and managed service revenues as well as the expansion of product revenues with existing customers.
The Technology & Services Industry Association (TSIA) is dedicated to helping technology and 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.