Every B2B customer expects how quickly they want to be served by each portion of each service operation and frequently with each serial-numbered product. For example, my HVAC service company does preventative maintenance procedures on my heating and cooling systems. It doesn’t matter if they come every six months or any other reasonable interval as long as they check the furnace before mid-October and the AC before mid-May. But, if they find a problem that will make the equipment unusable, I expect it will be fixed within 24 hours. And they know how I, and most of their other customers, feel since they built a 24-hour equipment repair into their service contract. Knowing this, they can use customer’s expected response time to segment service products.
This article contains several examples of how I used expected response times to segment service products and create new offers. The offers are actual and well accepted by the customers I described.
A recent example of how Amazon made a speedy delivery to me without knowing my customers’ expected response time
I recently had an experience with Amazon that inspired me to write a LinkedIn post, which received 4,657 Impressions, 36 likes, and 28 comments. Here is the post:
This morning, at 9:13, I ordered something from Amazon. It was delivered at 12:43. It took 3.5 hours to process the order, pick and pack the item, give it to a delivery person, and drop it off at my house. And I did not pay extra for expedited delivery.
If I were the plant manager at a high-volume manufacturing facility and a critical piece of equipment failed, I would be ecstatic if a repair part could be delivered from the dealer to my plant floor in 3.5 hours.
If the plant was within 10 miles of your nearest service location, how long would it take to deliver any random part within 3.5 hours of receiving a P.O.? If the required part was stored in a mobile technician’s truck, would someone from your location drive to the truck, pick it up, and drive to the plant? Is that your standard procedure? If you answered no, you should start improving your processes because Amazon sets the logistic standards for most people. And it doesn’t matter if the order is for a personnel or business order.
Unfortunately for Amazon, this speedy delivery will not influence me to shift more of my purchases to them. Very few of my purchases are needed immediately, so who cares if it takes three hours or three days to arrive? However, as I said in the post, the speedy delivery would make a difference if I were in a situation where I absolutely needed the item in a hurry. It doesn’t matter if it were to my home, a manufacturing facility, or a hospital.
How a B2B service operation can identify a value of the customer’s expected response time and segment service products
A cost-based analysis can identify scenarios in which a time-based strategy will create customer value and increase customer lifetime value.
In the aftermarket setting, a time-based strategy always includes people’s response time or parts delivery. Here are some examples of each:
- People’s response time
- Answer a phone, text, or email inquiry
- Identify a problem and recall, or find a reference to, a solution
- Dispatch a knowledgeable technician with the required parts and project an estimated time of arrival (ETA)
- Schedule and confirm a time slot for a depot repair
- Parts delivery
- The seller must receive and process a purchase order without a warranty or service contract. Once the P.O. is processed, they must do everything identified in b. below.
- If under warranty or service contract, the dealer or OEM must create a work order, order one or more parts, locate them, open a shipping order, and pick and pack the parts. Sometimes, only some of the ordered parts are available, so someone has to decide if a partial shipment is worthwhile.
- Someone has to decide which shipping method will ensure that the customer’s required delivery date and time will be honored. Remember that dealers generally ship locally, while OEMs frequently supply dealers internationally.
Each step has a cost, as do the alternative investments required to reduce the longest time to something more suitable for a segment of customers. Your value pricing experts will identify the price customers will accept for each option, and the operations team will identify incremental costs. If the suggested price exceeds the projected cost, you can proceed. Still, if the cost exceeds the value price, the organization must decide whether to absorb a loss in speed to provide a service consistent with reasonable customer expectations.
A real-life story of how I used response expectations for a variety of businesses
In my career, I have held service leadership roles in two very different industries. I will describe both situations.
Job 1—In the late 1980s, I moved from being the Director of Manufacturing Technology to the head of Customer Service. Our products were data communication systems integrated into IBM’s Systems Network Architecture. Our customers included IBM, some of the world’s largest banks, major stock exchanges, airlines, and credit card processors. Boeing, Grainger, and McDonald Douglas used our equipment in the industrial world. Regarding National security, we had equipment in Cheyenne Mountain, The White House, and a primary national security agency whose P.O.s came from Maryland Procurement.
Our equipment was redundant and fault-tolerant. Our two internal power supplies were each connected to individual power mains that were usually connected to different power lines. As you can tell, downtime was not tolerated. In all the time I worked in the company, we had a total system failure only once, and that was caused by the end user not following our instructions when they connected both power supplies to the same mains circuit, and someone shut the breaker down.
The equipment was very different from typical industrial machines. Ours was digital, with only hard drives as moving parts. We had one or more field engineers stationed in the major cities of the world where we had systems installed. We had direct employees in the U.S., Canada, and the U.K.; our international dealers handled sales and service in their territories. Our most demanding customers were located where we had direct service employees or, in a few cases, where we used certified third-party technicians treated as direct employees. Here are the services we actually sold in these countries (in declining order by price):
On-site engineers plus complete spare parts kits for each separate installation location.
- Two-hour response either during business hours or 24/7
- Four-hour response 24/7
- Advance exchange parts
- Preventative maintenance
- Training
- Disaster recovery (U.S. only)
- Time and materials on-site service with a best-effort promised
We provided each engineer with a complete spare parts kit for other on-site coverage. The service training system supported disaster recovery. It could be shipped anywhere in the U.S. within 24 hours and was only used to back up major equipment relocations.
Our salespeople talked to prospects about service as part of their fact-finding. Based on what they learned, they narrowed in on the customer’s expected response times and included the appropriate service product in their quote.
We could determine the annual cost of each service and set prices accordingly. We also ensured our customers knew they were not paying for actual work except for an annual preventative maintenance visit. Instead, they were paying for our engineers’ availability. New customers commonly place a service call within one week of accepting their system to ensure we would respond as quoted.
Job 2 – In the 1990s, I moved to a different company with several independent business units that supplied industries with unique expectations. Fortunately, most of our customers accepted our promise of best-effort on-site response, with warranty and contract customers constantly receiving the highest priority.
- For both our nuclear measurement and industrial analytical instrument customers, they usually had multiple instruments on hand or other less efficient ways to make their required measurements.
- Our semiconductor manufacturing customers have such a low tolerance for equipment downtime that they have in-house technicians trained by us and supported by a set of spare parts they own. We provide them with 24/4 technical support and a service where we ship a replacement part as soon as we are notified that they have to use a part from their kit. They must return the defective part within 15 days, or we invoice them.
- Our medical products were hand-held, and the repair policy was returned to the depot. Our turnaround time was two business days, and we had an advanced exchange program with an annual fee. Also, we established a flat-price repair schedule to avoid the hassle of creating a repair estimate after examining the equipment, sending out a quote, receiving a P.O., and then beginning the repair. Instead, we told the customer the flat-rate cost while issuing an RMA number.
Conclusion
Understanding your customers’ expected response times, providing them with reasonably priced service options, and always doing what you said would create a base of loyal customers who recommend your company to associates, repurchase from you when needed, and usually forgive the occasional error.
Suggested reading:
- Why The Say:Do Ratio Is So Important To Building Customer Trust
- Your Service Experiences – By Design or By Chance?
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals whose primary goal is to help capital equipment companies create more value for their clients and stakeholders. We continue to provide superior solutions to meet our clients’ needs by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization avoid revenue loss because customers fail to renew service contracts, please contact us or check out some free articles and white papers here.