Optimizing Service Partnerships: A Shift in the Success Metrics?

As I wrote in my previous entry, I spent a day at a “Partner Summit.” In this session, a group of TSIA members shared current tactics and current challenges related to working with partners to help deliver support services to customers. The companies in the room represented over $180 billion dollars in tech revenues—so their observations are clearly relevant to the state of partner management in tech.

These product companies have spent the past several years perfecting the process of selecting, enabling, and managing partners to deliver various support services.  Historically, the support services function within product companies has been very focused on optimizing the balance between customer experience and cost of services delivery.   The four to ten key metrics product companies use to measure the success of support services could be rolled into one of these categories.

The Extremes to Avoid

Over the past several years, there are two extremes every product company strives to avoid regarding the delivery of support services:

  • Under Serve: In this scenario, delivery costs have been driven down. However, customers are not satisfied with the service experience. Product loyalty is negatively impacted. Several well known tech companies have made this mistake, been penalized in the press, and then quickly increased their investment in support services.

  • Over Deliver: In this scenario, customer experience is outstanding, but delivery costs are not in line with industry averages. Outstanding customer experience does not buy incremental product loyalty. When customer’s demand cost competitive products, this is a lose/lose scenario. The company cannot afford to be price competitive because support costs are too high, and the customer doe not really value the incremental service level being delivered for the higher price.

The Current Sweet Spot

So, product companies have been extremely focused on reducing the cost of delivery without taking the customer experience below target thresholds.  In essence, they are trying to optimize the needles in the following way:

Tactics product companies have successfully pursued to meet this objective have included:

  • Aggressive use of outsourcing partners
  • Revised contract structures with outsourcing partners
  • Leverage of multiple service channels (web, crowdsourcing, etc.)
  • Segmentation of customer base into differentiated service models

Emerging Sweet Spot

But are the historical metrics of customer experience and costs enough in today’s marketplace? What if the economics of the product company became more dependent on services revenues and margins? If this was the case, the support services function within product companies would be asked to maximize total revenue opportunity from existing customers. In essence, a new, overarching metric of success would be established for support service organizations: The growth of total account revenues.

For some product companies, this shift in focus has already become a reality. These companies are now applying new metrics like “cross selling” and up selling” to evaluate the effectiveness of the support services function. In fact, what are the metrics support organizations should be using to validate their services delivery strategy is maximizing the total revenue (product + services) that can be extracted from a customer account? This is the new question being posed to service leadership. And with its answer will come a shift in how support services are delivered, how partners are leveraged, and how services are viewed as a potential engine for top line revenue growth.

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