The FT Word
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Welcome to the July 2005 issue of the FT Word. Please feel free to forward it to your colleagues.
Topics for this month:
· what do customers want?
· the “hidden” costs of outsourcing
What do customers want?
Thanks to Rey Basa for suggesting this topic.
Why should support managers and executives care about what customers want? For pragmatic reasons, of course, such as whether to focus on phone support or electronic support, but also for strategic reasons: to run a profitable support business you must know what customers expect and are willing to pay for.
If you’ve ever tried to define what your customers want, you know that different customers have different ideas about what’s valuable. Here are some general guidelines.
All customers have consistent basic needs. Before we jump into typical needs of different constituencies, it’s useful to recall that all customers have some pretty unchanging needs, such as:
· Clear expectations. It should be crystal-clear that the support program includes X, Y, and Z, with no feeling of “bait-and switch”. This is a key consideration when designing new support programs: carefully define what will happen to existing customers!
· The right answer. Nothing replaces that… Do all you can to train your reps to deliver the right answer every time.
· Consistency. Many customers contact support repeatedly. If they get widely different experiences each time they will feel uneasy and they will have a tendency not to trust the support group. Work on process definition to ensure a consistent experience.
· Responsiveness. Waiting 3 days for an initial response is too long. Train everyone in the team to respond promptly (within your defined target) even if they do not have an answer for the customer.
· Closed loops. Each issue deserves a complete answer (even if the answer won’t be what the customer would like it to be).
· Respect. This one goes without saying.
· Choices. Customers like to be able to control how they receive support. Avoid forcing them down one path
Although customers share many basic needs, different customer segments have different needs.
Consumers are most cost-conscious
While all customers want good value, consumers are particularly reluctant to part with their money. (And, to a lesser extent, small business fit that mold too.) This means offering plenty of complimentary services, usually leading with an online knowledge base so customers can help themselves rather than having to pay for service.
It also makes sense to offer a reasonable but limited amount of free support rather than having to haggle with new customers. Many companies offer free personal support for 90 days, or one free contact for registered users.
Business customers value their time and resources
Business customers, in contrast to consumers, are willing to pay if it saves them from having to find the answer themselves. Many vendors offer different levels of support to allow their business customers to choose the level of service they need. Build your selling arguments as ROI: you could spend X hours on downtime, or troubleshooting time, or you could call us instead.
Enterprise customers value stability and predictability
The larger business customers value predictability. For instance, a pay-per-incident approach is not attractive to them: they prefer contracts so they can predict their expenses. On the technical side, they are more cautious than smaller customers: they cannot upgrade their systems without a rigid testing process, so they appreciate long support periods for old releases.
They are also willing to pay for higher levels of service that helps their systems be more stable: for instance, proactive technical account management, with assistance to plan for upgrades.
Be aware of budget cycles when working with government customers
Government customers are often subject to rigid budgeting cycles. While they happily pay for support (and often haggle less than other business customers) they need to be able to predict expenses for the long term. Offer them the opportunity to forecast their support expenses for several years at a time. And why not let them choose the date of their support renewal so it coincides with their budget year?
Depending on the specific application, government customers may be less concerned about very fast response times than other business customers (not if you are supporting a 911 response system, of course, as I once did!)
You won’t know for sure until you investigate
The real answer to what customers want is “it depends!” So you need to find out from the experts: your customers. Treat it as a standard market research study, as you would conduct for a product.
· Survey the entire customer spectrum. Not just the whiners or those who are pushing the envelope
· Ask for purchasing intentions, not just wishes. Sure, everyone wants super-fast response times and a dedicated rep, but not everyone is willing to pay for it.
· Get inspiration from non-competitors. Of course, competitors are important but often customers are often more focused on the other vendors they use. So if their reporting vendor offers a particular support feature they like, chances are they will want it from their ERP vendor as well.
· Look for segments. A few of my clients have just one customer segment. Most have several, and they are not hard to find once you are open to the idea (hint: they often come under the small, medium, and large categories).
· Cater to the top and to the masses. If you find multiple segments and your group is small, target your largest segment first, and invent whatever’s needed to take care of your key customers. Don’t worry about catering to smaller segments until you are a bit larger.
· Create clear descriptions of deliverables. Each segment needs a clear checklist of what they will get when they sign up for the various offerings. Organize the descriptions by benefit to them. This will also let you contrast the different values of diverse offerings.
· Train the sales force. Clearly label the offerings by segment, and offer sales tools including PowerPoint presentations for the high end, Q&As, and objection-handling suggestions.
The “Hidden” Costs of Outsourcing
Thanks to Harry Cook for suggesting this topic.
Question: if I currently spend $50 per case with internal resources and I can outsource to India at $10 per case, what’s the savings associated with outsourcing? (Hint: if you think it’s $40 per case, you are flunking the test!)
First, you need to consider the not-so-hidden costs.
· The $10 figure is only valid for the “easy” cases that will be solved at the outsourcer’s. Compare apples and apples.
· You will need a relationship manager, perhaps some full-time.
· You will need travel expenses to the outsourcer’s, not just for the manager but for training.
· Your telephone costs will increase, perhaps significantly.
· You will probably need to create detailed training on products, processes, and tools, training that may not exist to that level of detail for your existing staff.
Second, there are more hidden costs.
· Outsourced support staffers typically turn over much faster than internal staff. Be prepared to retrain every few months.
· Less skilled support staffers will take longer to resolve issues (both Harry and I use a 20% “bump” when doing staffing models for outsourcing – great minds think alike!)
· less skilled support staffers may also create more callbacks, as customers attempt to get a better answer
· you will need a longer lead to roll out new products: remote staff cannot move quite as quickly as
· escalations may not be documented as well as they would be with internal resources, creating more work for level 2
· customers may be less satisfied, which carries all kinds of costs in terms of more escalations, lower repurchases, lower referrals
Did I scare you away from outsourcing? That was not the intent. But you should assign some financial cost to each of the hidden costs above: no more comparing the $10 case with the $50 case.
For more tips on successful outsourcing, see the FT Works booklet Successful Support Outsourcing
FT Works in the News
SSPA News published an article I wrote entitled “Knowledge Management Metrics” You can read it at http://www.thesspa.com/sspanews/June05/article1.asp. Please ask for a copy if you are not an SSPA member and cannot get to the URLs.
ASP announced the 10 best web support sites of 2005. They include BEA, Cisco, Cognos, Interwoven, McKesson ECSG, Microsoft, RM, and Xilinx and two small companies, Pervasive Software and Think3. As a judge, I was very impressed with this year’s crop. The full report will be forthcoming in the summer. Congratulations to the winners! http://www.asponline.com/awards.html
Curious about something? Send me your suggestions for topics and your name will appear in future newsletters. I’m thinking of doing a compilation of “tips and tricks about support metrics” in the coming months so if you have favorites, horror stories, or questions about metrics, please don’t be shy.
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