Service, Please

Wake the dormant "service giant" in your company.

What has changed in our market economy that customers are mostly degraded to mere consumers, to "users" at the end of the industrial value chain who must ensure that everything is "moved" that others want to sell? Quite disrespectful, quite low-grade. Where is the understanding of customers' real needs, where is the love for service?

Especially today, in an era of transparency through the internet, where it has never been easier for customers to research products, compare them and exchange experiences with manufacturers or retailers, the most important success factor for companies lies in excellent service that differentiates them from everyone else. But service is not an end in itself. It is about delighting customers, turning them into loyal repeat customers, and of course benefiting financially as a company.

Service as a growth engine for industry

Many industries, including manufacturing, have significant potential for new services. While industrial companies used to represent a closed manufacturing process at the start of a value chain, today they will only survive in the long term if they also offer useful services around the products they produce. The boundaries between industry, retail and various service providers are increasingly blurring.

The service business is therefore an extremely attractive opportunity for business development, but most industrial companies still do not use it, or do not use it enough. According to a study by Bain & Company, the performance of industry already looks impressive at first glance: the service business generates around 26% of revenues for many European industrial goods manufacturers, represents half of industry profits, and grows at a solid 5% per year.

But behind these figures hides enormous untapped potential. To this day, the typical industrial goods manufacturer serves only 10 to 25% of its existing customers with service offerings. Many companies do not even know how large the full potential of their service business truly is.

Very few market their service offering actively with a dedicated sales unit. Instead, they answer customer requests reactively and often deliver the expected performance poorly or not at all. Disappointed expectations cause companies to miss many opportunities, including in pricing.

Typically, companies calculate based on cost plus a service margin, but they do not consider what the service is actually worth to the customer. This can lead to undifferentiated spare-part pricing and almost giving away know-how transfers. Yet there are countless ways to expand services profitably: from serving existing customers better to developing entirely new services based on the company's often substantial knowledge base.

Competition does not sleep

What the market's perception of service looks like around some industrial companies, and what opportunities arise from it, is shown by the example of the company "mehrService" (link). The name says it all: the company offers service services for sheet-metal processing machines from TRUMPF (link). Now, it is not as if TRUMPF, a market leader in sheet-metal processing and metalworking, would not take care of service for its own machines. So why can a third-party provider succeed?

A bit of Google research led me to the employer review platform Kununu (link) and a forum for experts and users, CNC-Zone (link) - in other words: employees and customers of TRUMPF.

I do not want to jump to conclusions and leave everyone to form their own judgment. Still, it is probably not wrong to say: there is potential for more service here - in the double sense of the word and the company name.

In today's economic environment, service is one of the few remaining growth opportunities for many companies and must not be left to competitors, certainly not unwillingly. Customers need good service even in difficult times.

Service creates more stable and reliable revenue, while new business for machines and plants depends heavily on the economic cycle. Investing in service pays off: profit margins on service are four times higher than those on products in traditional capital-goods business.

The path to becoming a service giant

The shift from a product focus to a service focus requires a clear commitment to orient processes and touchpoints around the customer, to anchor innovation deeply in the company, and to change the company culture (the day-to-day way employees and customers interact). Just as the relationship with customers has evolved toward more equality, the relationship with employees must fundamentally change as well.

Empathy becomes a key competence of successful companies. Leaders, but also all other employees, will have to sense the values of prospects, customers, employees, partners and suppliers. In the future, a lack of empathy will likely become a fatal competitive disadvantage.

It takes a willingness to listen and the ability to enter other people's worlds in order to develop excellent services and make them doable for employees and tangible for customers.

The service reality

Unfortunately, a counter-trend in service can be observed in many areas. The internet makes it possible for almost anyone to compare products and services and often obtain them at the lowest price. This is, in itself, a good thing, and companies themselves increasingly fuel it.

To be clear: the internet is merely an overarching technical platform, not an uncontrollable culprit. But to withstand the resulting price and cost pressure, more and more companies cut customer service and other "soft" quality factors. In customers' perception, many companies reduce themselves to quantities, prices, tariffs and conditions.

The long-term negative consequences are often not noticed by customers, or perhaps ignored, and sometimes companies ignore them as well. The advantages of low prices seem to outweigh everything.

That customers get no real help on site in case of problems, that on the phone (if you finally get to speak to a human) you have to navigate multiple service levels in multiple call centers, that angry customers stop buying and vent not only privately but on social media - all of that does not seem so bad to many companies. A new campaign with attractive offers seems to create enough short-term replacement for lost customers.

But at some point, products become so bad due to missing service infrastructure that they are effectively unusable. A tablet bought at the cheapest tariff becomes worthless if no one helps with serious issues. And then the price customers are willing to pay moves toward zero.

In a current representative study, the question "Which of the following criteria is particularly important to you in service?" led to the following results:

Price is not ranked number 1, but number 7. Yet many companies keep making it number 1, while the sleeping "service giant" remains asleep.

How often do different departments in a company not know which interactions customers have already had with colleagues in other departments, and there is no way to access customer data across the organization - if it exists at all, and in a usable form. Customers are forced to provide their customer number, case number, order number, account number, and their concern again and again with every contact, simply because they are connected to a different employee than last time. Quite frustrating - for customers and for employees.

Use your opportunities. Be ambitious and wake the "service giant" in your company. The customer is not a disruptive element in the value chain; they must become a "friend" who helps the company, as a change agent, to improve and evolve.