Recently, the Blumberg Advisory Group partnered with Help Lightning to tackle an important topic in the world of service: the need to maximize service revenue. Learn how service organizations can serve customers and improve their service revenue by adopting a hybrid model for service pricing.
The Field Service Industry’s Holy Grail
For decades, field service organizations (FSOs) have been pursuing strategies to reduce truck rolls and improve first-time fix rates. These dual outcomes lead to cost reduction and are the Holy Grail for FSOs. Of course, an enhanced first-time fix also leads to higher satisfaction. Yet, just like the medieval legend of the Holy Grail, cost reduction is continuously earnestly pursued but never quite wholly attained. Once the prospect of sizable cost reduction is in reach, something can adversely impact any gains an FSO has made. These include a new product roll-out, technical development, or an industry trend.
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Challenges to Cost Reduction
To better understand this point, let’s look at the strategies traditionally available to FSOs for reducing truck rolls and improving the first-time fix. One such strategy is telephone troubleshooting. However, the shortcoming of telephone troubleshooting is that it is for the telephone technical support specialist to observe the problem or difficult for the customer to describe it. These inherent limitations lead to more time spent on the telephone. This might be at odds with an FSOs objective to improve customer experience.
Another strategy that FSOs have turned to is the implementation of Knowledge Management Systems (KMS). These applications allow FSOs the ability to build a searchable database of problem-symptom-cause and corrective actions. This information helps Customer Service Reps (CSRs) determine if the company had seen this issue before. They can then resolve it remotely and share the corrective action they took to solve it. Alternatively, if the problem requires a field service engineer, the KMS also helps identify what parts and skills are needed to fix the issues. The information from the KMS enables the CSR to dispatch a technician with the right skills and parts necessary for ensuring a first-time fix. A downside of a KMS is that it requires time, resources, and capital to implement. While it may lower costs, it does have a high start-up cost and time investment in the short run.
Other Options To Consider
More recently, FSOs have been able to turn to AI-enabled autonomous recommendations engines to achieve similar results as KMS. The technology represents a new business model for FSOs. It also represents a more efficient and automated approach to troubleshooting. However, it does require a significant amount of data. The data may not be initially available, so the end-user organization has to acquire it over time, or the application may require additional labor to populate it with the required data. At any rate, there are some additional costs involved.
While both KMS and AI may represent the future of support, there will always be times where human intervention is required. However, this type of intervention doesn’t have to be entirely manual. Over the past few years, Augmented Reality (AR) has emerged to facilitate a smoother, more efficient support experience than traditional manual approaches like telephone support when manual intervention is required.
An Emerging Best Practice
Several years before the COVID-19 Pandemic, innovative FSOs turned toward Augmented Reality (AR) tools and applications to provide customers with a Remote Visual Assistance (RVA) experience. By utilizing RVA technology, FSOs can resolve problems remotely. They can also identify parts and skills needed to fix a problem when an onsite dispatch is required.
RVA provides a visual display of the customer’s equipment and allows the help provider (i.e., Tech Support Specialist) to see the problem directly. This “I see what you see” model provides the best scenario for providing remote support. In addition, some RVA software includes features that allow the support agent to virtually interact. This includes using gestures and non-verbal clues to help the receiver solve their problem.
Research On The Value Of Non-Verbal Cues
According to the Journal of Non-Verbal Behavior, adding gestures and nonverbal clues substantially improves the speed of understanding. This results in an enhanced recipient/customer perception of the overall experience. Research published within the British Journal of Clinical Psychology indicates that nonverbal cues are 430% more effective than verbal cues. In addition, nonverbal cues in combination with verbal communication are up to 10 times more effective. The net result is that RVA offers significant advantages over traditional remote support models (e.g., telephone support, KMS, etc.). It leads to improvements in several key performance areas.
Impact of Remote Visual Assistance on Key Performance Indicators
The use of RVA increased significantly during Covid-19 as it provided an effective strategy for delivering a touchless service experience. Primarily as a way of overcoming obstacles associated with social distancing, lock-downs, and quarantines.
Maximize Service Revenue: A New Business Model
The adoption of RVA during the Pandemic as a viable tool for service delivery has led to the “Hybrid Service” model. This model provides a proactive service experience by utilizing RVA, IoT, and AR to remotely predict, pre-empt, and resolve as many service issues as possible. This activity takes place after RVA is used to assess the problem and determine what parts and efforts are needed to solve the issue. It takes place after RVA has been used to evaluate the situation and determine which spare parts and steps are required to solve the problem. In the Hybrid model, field service dispatch is for service events that are not predictable or too complex, or time-consuming to be resolved remotely.
Imagine a field service engineer (FSE) runs into an issue they’ve never seen before at the customer’s site. Now they can communicate with a remote support expert or fellow FSE through RVA to obtain additional assistance. According to the Service Council 2021 annual survey of Field Service Technicians, the “2021 Voice of the Field Service Engineer (VoFSE)” survey, 81% of FSEs will “phone a friend when they find themselves in a bind. RVA software provides a more secure environment and a more effective environment for FSEs to connect and communicate.
The Hybrid Model
The hybrid model is becoming the new normal in the Field Service Industry. It will, of course, take several years until this model reaches the late majority stage. In the meantime, FSOs are beefing up their investments in AR tools. Blumberg’s 2021 Field Service Industry Sentiment Study reveals that 33% of field service leaders believe that AR will become essential. Over 85% of respondents indicate that AR will be commonplace within three years.
It’s not just in field service where RVA is applicable. RVA is suitable for managing inspections, site surveys, installations, product support, engineering design changes, product returns, and many other use cases. RVA is effective for any activity involving standard or repetitive tasks that require visual observation.
Hybrid service and RVA have redefined the service business model. This development presents a challenge for FSOs who generate a significant amount of revenue from onsite services. Their concern is that field service avoidance technologies like RVA will reduce onsite visits and cut into their revenue base. FSOs can prevent this scenario from occurring by understanding how to monetize their investment in RVA.
Cost Savings Potential
A company can monetize its investment in technology in two ways. The first way is by using technology to reduce costs. The second way is by using technology to generate new revenue. RVA’s ability to efficiently resolve issues remotely means less talk time, fewer product returns, and fewer truck rolls. It also could result in improved ability to accurately identify which spare parts are required to resolve a customer issue. This could lead to lower service parts logistics costs.
These benefits can dramatically reduce overhead and direct operating costs leading to an overall improvement in bottom-line profitability. Although the savings may appear nominal at first, they can grow exponentially over time. This happens as the business scales and end-users become more proficient with using the technology.
Overhead and Direct Costs Savings from RVA
Revenue Generation Potential
While RVA lowers costs, it also plays a role in generating new revenue sources and helping tomaximize service revenue. FSOs have achieved this result by promoting RVA as a value-added service feature and charging a premium fee for this experience. Their customers are willing to pay the premium because RVA leads to a faster response time and service resolution than if they opted for onsite service.
From a tactical perspective, FSOs canmaximize service revenue from RVA in one of the following ways:
- Offering RVA as an upsell/cross-sell during the call entitlement process
- Leading with an RVA First service offering
The upsell/cross-sell approach involves selling RVA in the same way companies sell Help Desk services, either based on a per-event fee or a lump sum payment for a block of RVA facilitated service events. This approach gives the end-customer options at the point of service. They can either accept the offer and initial an RVA session promptly or wait until an FSE arrives onsite.
An RVA First Model
In the RVA First model, RVA is part of a service agreement that includes remote support, onsite service, and other added-value services. The benefit of offering RVA as part of a contract is that it provides a predictable revenue stream. The value proposition for the customer is that the RVA First offering will provide a better and faster service experience than an onsite service contract.
An FSO can always down-sell to a less expensive service package that does not include RVA if the customer feels the price is too high. However, when given a choice, customers are less likely to give up the benefits of RVA and will purchase the premium offer.
Maximize Service Revenue: Three RVA First Approaches
We’ve identified three ways FSOs are implementing an RVA First Model tomaximize service revenue for their companies through our research. One way is by incorporating RVA into a premium-priced service agreement. This strategy involves positioning RVA as a value-added service offering that leads to faster service resolution times. FSOs who pursue this strategy can generate higher-margin revenue and increase value to their customers.
Cincinnati, Inc., one of the world’s largest machine tool manufacturers, has been able to quickly build a profitable, recurring revenue stream by bundling RVA into their service offerings. This strategy is a significant contributor to the company’s overall revenue and profits, increasing gross margins from service by 20%. This revenue stream continues to grow every year as new customers sign-up for the RVA-enabled service plans.
“We get a solid return on investment from monetizing RVA,” notes Greg Wilson, Director of Service at Cincinnati. “We make our investment multiple times over.” Wilson estimates the ROI is as high as five times.
Monetizing The Investment In RVA
FSOs can also monetize their investment in RVA by incentivizing end customers. They do this by placing a greater volume or value of equipment under a service agreement. For example, a leading medical device manufacturer automatically provides RVA to clients with $50,000 or more under a service agreement. The positioning of RVA as a priority offer generates higher revenue for the manufacturer. This is because RVA serves as an incentive for end customers to place more equipment under a service agreement.
A third way that FSOs are implementing an RVA first strategy is by leveraging purely it as a competitive differentiator. Ricoh utilizes RVA as a key selling feature in its RICOH Service Advantage offering, which provides Ricoh’s technology support infrastructure directly to OEMs as an extension of their technical and customer support services. Ultimately, Ricoh helps OEMs, particularly in retail, to service their equipment client-side without the need for in-house investments. RVA is referenced in Ricoh’s sales and marketing collateral as well as in proposals for winning new business.
Strategies for Monetizing RVA
Segmentation & Monetization During the Warranty
The decision to charge a premium price for RVA may differ from industry segment to segment. There are some segments where service providers may opt to include RVA First as part of a standard warranty offering. Others may find it more advantageous to have it in an extended warranty or added value service agreement. The economics of product support, the volume of interactions, and the complexity of service are critical factors in this determination.
In broad terms, B2C technology segments such as mobile devices, personal computers, and televisions have a high volume of service activity, particularly during the warranty period. The economics of onsite service in relation to the product purchase price can be rather expensive. In addition, the service resolution process is often relatively straightforward. It may even involve a lot of issues that are the result of user error. This situation represents a perfect use case for RVA.
The Basic Warranty
Given the objective of minimizing truck rolls and telephone talk time, a manufacturer or service provider in the B2C segment may find it in their best interest to provide RVA enabled customer self-service as part of the basic warranty. Under this scenario, the service provider could charge an additional fee to those customers. Especially if they prefer onsite service to customer self-service. The manufacturer/service provider could also provide RVA with an extended warranty once the basic warranty expires.
In contrast, B2B technology segments tend to experience more complex service events. The cost of onsite service is increasing, typically more expensive, and the value in use to the customer is higher. For example, a hospital or manufacturing facility can lose hundreds of thousands of dollars every hour their equipment is down. As a result, end-customers are receptive to paying a premium for a rapid resolution delivered through RVA. These fees are achievable provided the manufacturer positions RVA as an application that facilities improved uptime and faster service within the context of an outcome-based service agreement.
Tomaximize service revenue with RVA is not necessarily a “slam dunk” or “a walk in the park.” It does require a little bit of effort to generate incremental revenue from RVA. Based on our research, we’ve identified five (5) tactics that facilitate an FSOs ability to monetize their investment in RVA andmaximize service revenue from an RVA First service offering. These include:
- Clearly define the value proposition: The success of any offer, whether it’s a product or service, is rooted in a company’s ability to articulate the value proposition to customers clearly. The same is also true for RVA First offerings. FSOs need to describe the value and benefits of RVA as it may not be evident to customers
- Create marketing collateral and sales aids: Buyers within the customer organization may not necessarily purchase the RVA offer the first time they hear about it. Even if they do purchase, they may need to rationalize or justify their decision to others in their organization. They may need to involve other stakeholders in their organization. Marketing collateral in the form of brochures, data sheets, case studies, etc., can help convey the value of RVA.
- Develop optimal pricing based on value-in-use: The ability to develop an optimal price for your RVA First offering depends on your company’s understanding of the value-in-use for this service. Value-in-use is the cost to the customer of not obtaining the service. For example, a manufacturer can lose tens or hundreds of thousands of dollars every hour that their machine is down. RVA prevents this problem from occurring. The higher the value-in-use, the higher premium your customers may be willing to pay.
- Promotion throughout the customer journey: FSOs often fail to generate substantial revenue from their RVA First offering because they view it as a one-time sale. In essence, they only offer it through a service agreement at the point of product purchase. FSOs who offer RVA throughout the customer journey are likely to experience higher attach rates and revenue. This is from the provision of the RVA First offer during the warranty period. Usually as part of the entitlement process, or through targeted marketing campaigns.
- Reinforcement: Customers need constant reminders of the benefits of RVA; otherwise, they may not purchase or renew the offer. If a customer has purchased RVA, the best way to reinforce its value is for your technical support to engage the customer in an RVA session proactively. They have to describe to the customer what they are doing and then obtain their feedback (i.e., measures their satisfaction with the process). A way to reinforce the value of RVA among customers who have not yet purchased the RVA First offering and turn them into paying customers is by enlisting the help of your field service engineers (FSE). Our research found that attach rates increased by 20% to 30% when the FSEs demonstrated the value of RVA during an onsite service visit.
These tactics are relatively easy to implement. However, as with any sales and marketing tactic, success is dependent on the ability to perform these tasks on a consistent and persistent basis.
Maximize Service Revenue: Summary & Next Steps
In summary, Remote Visual Assistance plays an essential role in redefining field service best practices from operational excellence and a go-to-market perspective. From a functional perspective, RVA provides an elegantly simple approach for reducing service delivery costs. RVA achieves this result through its ability to resolve issues remotely and gain better visibility into the types of parts and skills needed to resolve onsite service issues. In short, RVA can help reduce truck rolls and repeat service visits due to a lack of parts or skills.
Through RVA tools, field service organizations have been able to develop and implement Hybrid Service Delivery models. These models typically lead with a remote support first model. This is where the FSO attempts to resolve as many incoming service requests remotely utilizing advanced technology like RVA. In this model, onsite dispatch is for issues too complex or time-consuming to resolve remotely. The net impact of Hybrid Service is optimized service delivery. This results in lower costs, increased productivity, enhanced CX, and greater control over resources.
More Than Just Reducing Cost
RVA isn’t only about reducing costs and eliminating onsite dispatches. The technology also enables FSOs tomaximize service revenue. More specifically, FSOs have monetized their investment in RVA by creating new premium-priced service offerings – positioning RVA as a competitive differentiator. They also include RVA in significant-sized service agreements. In either case, FSOs have been able to attribute significant revenue to these strategies and experience a high return on investment.
Ready to learn about RVA to help maximize service revenue? Request a demo of our remote visual assistance technology.