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  Seven Easy Steps to Increase Service Revenue
 
"Revenues are going to be flat or declining in the coming quarters. Because the capital expenditures are on hold, we expect little to no growth in product sales" is what you hear over and over again. Without a doubt this is a very tough economy, with no favorable trend on the horizon. What if you could increase the revenue numbers despite declining product sales and defend market share? Sounds sweet? Read on. Traditionally, manufacturing and software companies have service revenue as low in the priority list because it contributed less than 20% of the overall revenue. This lack of focus has resulted in lost revenue, albeit its high-margin, annuity revenue stream. Without service contracts, companies tend to lose touch with their customer install base, impacting repeat sales and customer loyalty. However, in today's economy, can one afford to leave any dollars on the table? And yet most companies have not reckoned with the full potential of service revenue. By putting together best practice processes and systems, you can see how to maximize service opportunity for your company.

1. Have a Focused Service Sales Team: Does your company view the renewal of support contracts as an administrative task or as a sales function? Turn the Contract Administrators into Service Sales Reps by making them accountable for service revenue numbers; provide them with quotas and appropriate bonuses or commissions for meeting or beating the targets. This change of role will increase the team's motivation and motivated people increase sales. Provide specific incentives for goals such as up-selling support levels (basic to extended care), selling multi-year contracts, and selling add-on service products such as training. All too often, some companies, especially software companies, treat renewal as a pure billing function and thus contract administrators report into the Finance organization. Strategically, service should be treated as a profit center with P&L responsibility. To get the inside reps to sell services pro-actively may require organizational change in titles, responsibilities, incentives and education. That brings us to the next step.
    
   
2. Educate Staff on Service Programs: The inside sales reps, field sales reps and the entire service organization should be familiar with the service offerings. The choice and benefits of service levels should be easy to explain. The service marketing organization should educate the employees and resellers on the value of service programs. Build value selling tools such as collateral, ROI models, and testimonials for marketing the programs effectively. Don't allow sales to cannibalize service revenue for product sales. There should be strict policy not to discount service as it reduces the value of service and the annuity revenue potential of services.
    
   
3. Invest in Tools: Often the IT makes huge investments in SFA (sales force automation) tools for product sales with very little investment on service. Such systems are not effective in selling and managing service contracts because they do not have visibility into service availability, service level pricing and the customer install base. Consequently the service sales reps have no proper systems for quoting service and renewing contracts. The lack of service sales tools has resulted in many companies resorting to spreadsheets (Excel) or home-grown systems, which are inadequate, error-prone, and do not scale with an expanding install base. Inside sales reps often spend an inordinate time administrating quotes and contracts, taking time away from selling to their customers. Invest in tools to streamline quoting and renewal process. Make your Service Sales Reps most effective with a system that addresses contract merging, co-terminating and pricing of service contracts with simplicity. Ideally, customers and resellers should be able to use self-service tools on the web to manage their install-base, request changes to quotes and renew service contracts on-line.
    
   
4. Automate Notifications: How does the renewal process differ based on value of contract? Do your systems automate the renewal notifications for low dollar contracts? Because of manual systems, a huge number of low dollar contracts often get ignored and don't get renewed; leaving money on the table not only for the current period but also for future periods. Apply the 80-20 rule i.e. automate the 80% of low dollar contract that bring in 20% of revenue. Having systems in place that automatically notify customers ninety, sixty and thirty days prior to expiration can be effective to squeeze every dollar from your install-base. Additionally, mining install-base information provides a goldmine of opportunity to up-sell and cross-sell new products and services.
    
   
5. Leverage the Resellers: Resellers, partners and system integrators should be considered an extension of company's sales force. Today, about 70-80% of IT equipment is sold through the channel. While the resellers have many competing products and services to sell, the manufacturer who provides the best tools are going to get the most attention. In reality, most manufacturers do not have a clear plan how to work the channel in renewing support contracts. Resellers should be partners in service renewals. Provide appropriate incentives, collateral material and collaborative tools for the resellers, so that they can be proactive in selling services as seamlessly as they sell your products. Involve them in the renewal process and turn the renewal cycle into up sell and cross-sell products and other services. By having access to the right tools, the resellers can build customer loyalty, which is critical in this competitive world.
    
   
6. Track Metrics: Are you able to determine the effectiveness of service programs, average days to close, renewal rates, warranty conversion etc? Most companies do a poor job of collecting and analyzing service sales metrics. Start tracking attach rate, renewal rate and attrition rates by customer, channel, product, region, and contract size. The ability to analyze data on sales enables the service marketing and sales operations to take appropriate actions by tailoring your service programs and focusing resources to maximize the revenue potential.
    
   
7. Everyone's Responsibility: Selling services should be everybody's responsibility. The selling of services starts with the sale of products. Some software companies have made it mandatory to attach a support contract for the first year. Any product sold without a service contract should be considered as a candidate for selling support services. TAC and field engineers, given familiarity with the service programs, can communicate the value of service to the customer and suggest appropriate service level agreement (SLA) to suit the customer's needs. Establishing a good entitlement policy will help to drive home the value of service and not give it away. Even if you use third-party service providers as most companies do, a referral program would help increase the service sales opportunity. Selling services should be done during all touch points with the customer.