Unfortunately, the process of uncovering the data required for effective service contract management is highly complex. Service contracts are often sold through a two-tiered channel consisting of a distributor and a value-added reseller (VAR), making sales processes complicated and leading to missing links in the collection of customer contract data. Challenges arise because adequate systems are not in place for properly registering or effectively tracking the sale of maintenance service contracts. In addition, data is stored in disparate systems, requiring time-intensive mining and management — an undertaking that most IT departments would rather avoid. Compounding the issue, distributors work with hundreds or even thousands of VARs, who in turn may also represent numerous manufacturers, each with individual business rules and methods for product registration. Consequently, the quality of registration and service data is often compromised, which not only leads to delays in end-customer service entitlements, but also hinders service sales and renewal efforts.
For the reasons outlined above, it's apparent that many companies have insufficient visibility into their maintenance annuity revenue streams. It's not that the data don't exist; it's that there are far too few effective tools and processes in place to leverage the existing data. In fact, it's estimated that most organizations have at least five years worth of asset and maintenance data that they can turn into major revenue streams today. Because these same companies have been so focused on identifying new customers, they have neglected this opportunity. Or, they simply have lacked the internal capability to turn that data into information from which they can fully benefit.
Implementing an Effective Service Contract Management Program
The beginnings of most service contract management issues can often be traced back to the time when a product is initially purchased. On average, only 60 percent of technology products sold with service get registered with the manufacturer. When a service product is not properly registered, it is not entered into the manufacturer's entitlement system, which is the data structure for all contracts that have been sold and registered. If no record of a contract exists, the manufacturer or VAR cannot effectively provide service, much less track expiration notifications. This results in lost service renewal opportunities as well as the risk of non-coverage for the end customer on critical assets. Even worse, lack of registration can lead to loss of the customer due to dissatisfaction. The primary reason for such low service registration rates is poor data quality, which is the principal driving force behind new service contract management practices emerging today.
To get a better handle on maintenance contract opportunities, every company should first focus on improving their product registration rates. Successful registration triggers contracted maintenance obligations and establishes a valid record of maintenance activity. In addition, registration information provides ongoing refresh opportunities as manufacturers and their channel partners look for ways to generate incremental revenue from their existing customer base.
Today's best emerging technology platforms for service contract management are designed to perfect the registration processes, with automated tools for ensuring that every customer is registered accurately and on time. The most effective service contract management solutions are based upon a Software-as-a-Service (SaaS) model that not only provides centralized, online access, but also delivers an opportunity for a leveraged investment across the entire supply and demand chain. The key to the success of these systems, and the reason they are so effective at registration, is that they are data integrity-driven. In the service contract management arena, this means that they are built to provide a complete picture into the service opportunity available by tapping into a variety of data sources and systems that exist across the supply chain.
This process involves extensive data mining and aggregation — and often requires customer data integration (CDI) technologies — as specialists work to create a single system of record. This single system of record is designed to deliver the highest levels of registration data possible. Once armed with this data, manufacturers and their partners can create business intelligence (BI), which they can prime for a variety of other functions beyond service registration, including creating a service renewal program, identifying unattached assets or creating a sales incentive program for the channel. With sufficient levels of BI, along with the flexibility to attack their most pressing service contract issues, manufacturers are better positioned to achieve substantial increases in service sales opportunities.
Moving Beyond the Entitlement System