January online EXCLUSIVE: Optimizing the Service Supply Chain: Part III

Protect your installed customer base at the end of the product life cycle


Alert customers and sales/channel partners of pending renewals

The customer should be made aware of the need to renew well in advance of the service contract’s expiration date.  Companies must be proactive; sales teams or the appropriate channel partners need to be aware of pending renewals and alert customers of their options to renew.  This can be complex. Determining who “owns” the customer relationship is key to managing renewals effectively.  A company needs accurate information about the contract and who has primary responsibility for the customer relationship. 

Develop a single view of each customer

Companies may benefit by developing a system to identify and consolidate related service contract transactions.  A customer may acquire a number of the company’s products over time, which can generate multiple service contracts. Complicating matters, such acquisitions may originate from numerous channels—over the Web, via telephone, or from various customer locations and sales sources. 

A leading practice is to roll up all these customer contracts into a single file and offer to renew the support relationship in a single event. Such an approach can improve renewal rates and reduce transactional costs. It may also heighten customer satisfaction. Recognize, however, that even with a single view of the customer, a company will need to maintain a dissected view of the entities making the sales. One customer might have acquired a company’s products and services through a variety of sellers and channels—all of which must be respected with regard to commissions and relationship ties. 

Provide adequate incentives

Sales teams will likely guide customers toward renewals through an appropriately designed sales compensation model. An effective strategy would be to focus the sales teams to high-margin customers, while developing a less costly renewal solution—such as Web-based self-service options and credit card payment acceptance—for lower priority service renewals. 

Ensure adequate processes for closing renewals

The company should have clear visibility into service contracts being renewed on a timely basis, with a follow-up process that includes the customer or channel partner to positively influence the process.  In addition, the process should detect exceptions. If a channel partner or other sales agent owns the relationship with the end customer, that exclusivity should be limited. If a value-added reseller has not closed a services renewal contract within a mutually agreed-upon time period, the owner of the technology should have the contractual right to contact the customer directly. The short- and long-term value of service contract renewals is too great to leave to chance.

In summary, as the global market recovers, successful companies will place greater emphasis on product innovation. The service supply chain will likely be regarded as a potential source of recurring profits at three critical points throughout the product’s life cycle; at the time of initial product sale, during the product’s useful life and at the product’s end of life.  Our experience shows that companies can maximize the inherent profit potential and reduce costs in the life cycle of every product by viewing service and support as a means of creating loyalty and competitive differentiation. We have explored three opportunities along this life cycle for profit within the service supply chain. Companies can take immediate action on one, or all three, as they will likely not require significant capital expenditures or large investments.   The question on where best to focus, begins and ends with your understanding of the needs of the customer. 

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.

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