Optimizing the Service Supply Chain: Part I

It can lead to long-term product lifecycle opportunities


Offering an array of value-added services, such as consulting, dedicated service personnel, customized training programs, implementation support and other options can generate additional long-term revenue while enhancing the customer experience at the time of sale.  Remaining competitive is essential, of course, because savvy buyers look to total cost of ownership when choosing technology providers.

Improve Support Service Attach Rate

Bundling service with a product sale begins early in the cycle. Sales teams should be as focused on the sale of services as they are the sale of hardware or software; some companies divide the sales responsibilities accordingly.  The sales team must be armed with a clear value proposition to sell a “total solution” (including the provision for warranty upgrades) to the customer.

 

This is true in both direct and indirect sales models.  Channel sales teams, for instance, will recognize the importance and value of selling a support service contract at the time of a product sale once the value and strategic importance of doing so is understood.  With this knowledge, and given appropriate commissions and incentives, channel sales efforts can be realigned to include the sale service support contracts.  Discourage sales transactions that “give away” higher margin support services; instead, develop incentives to customers and for the sales force to encourage the sale of multi-year service contracts.

Successful companies approach key accounts with expertise from product and services functions.  While engineering and manufacturing focus on providing a high quality product, the customer support function should ensure that the level of services necessary to achieve optimal performance is delivered, thus improving the customer experience.  Beyond this fundamental orientation, a successful company needs to develop collateral to help facilitate a “simple” sale of support services bundled with the product sale. Forecasting and sales targeting tools that include support services revenue can help drive service contract sales. In addition, a company should provide initial and continuous training to ensure that sales teams know which support services will best meet a customer’s needs.

The paradigm shift has begun toward a greater understanding of the importance of bundling a new product sale with the service contract at the point of sale.  Through high-margin service contract sales, companies can leverage their existing service supply chain to reap recurring profits throughout the product’s lifecycle.

The next article in the series will examine methods for evaluating and improving the service process from the ground up, while exploring the tactical and strategic elements of reverse logistics.  It will also look at a number of key requirements to more effectively manage and execute service contracts during a product’s lifetime, and how organizations should optimize the repair and replenishment process making it easier on the customer.

Grant Gordon is a managing director in KPMG Advisory’s Business Effectiveness practice, based in the Silicon Valley. He can be reached at ggordon@kpmg.com.

Charles Withrow is a director in KPMG Advisory’s Business Effectiveness practice, based in the Silicon Valley. He can be reached at cwithrow@kpmg.com.

The views and opinions are those of the author and do not necessarily represent the views and opinions of KPMG LLP. All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity. No one should act on this information without appropriate professional advice after a thorough examination of the particular situation. 

  • Enhance Your Experience.

    When you register for SDCExec.com you stay connected to the pulse of the industry by signing up for topic-based e-newsletters and information. Registering also allows you to quickly comment on content and request more infomation.

Already have an account? Click here to Log in.

Enhance Your Experience.

When you register for SDCExec.com you stay connected to the pulse of the industry by signing up for topic-based e-newsletters and information. Registering also allows you to quickly comment on content and request more infomation.

OR

Complete the registration form.

Required
Required
Required
Required
Required
Required
Required
Required
Required
Required
Required