Here Comes the Amazon of Services

Drones probably won’t impact your field service company, but Amazon’s other accomplishments in online customer engagement most definitely will. Have you noticed that it is impossible to purchase anything from Amazon without first seeing a picture of what you are buying? On every page that references your items, there are pictures of those items. Here are some other questions about the Amazon experience to consider:

How often do you buy something from Amazon without reading the customer reviews first? And how often do you focus on the bad reviews to see what kind of trouble you might expect from the product? And how often do you ignore the good reviews that seem flowery or mushy with compliments but short on detail?

How many email updates do you get from Amazon regarding the status of your purchase? How often does Amazon call you with updates? How often do you call Amazon to request information?

Have you ever depended upon a paper invoice from Amazon as your record of what you purchased and how to pay?

All of the answers to these questions are simple and obvious, so I left them off. Yet most service contracting companies have not embraced the obvious lessons from Amazon. The whole world is being conditioned to expect online information about the things that they buy, and services will be no different. Look no further than Uber, the car transportation service, to see how service businesses will be operated in the near future. Skilled trades in service contracting will not be an exception. So what are you doing to prepare for the future?

If you manage or own a service contracting business, here are a few things to embrace before the Amazon of services embraces your customers and takes them from you:

Online Notifications – give your customers online status updates regarding service delivery. They do not want you to call, and they certainly do not want to call you.
Pictures – show customers what they purchased, or what you are recommending, via photos. Whether “before and after”, or “was dirty, now clean,” or “was broke, now fixed,” or “golly, this looks bad, we better fix it,” pictures are worth thousands of words.
Reviews – always ask for a review. It empowers the customer. It encourages good behavior from the technicians. It gives you content for your website that is valuable to the search engines.
Online Accounts – give your customers access to their service history and account settings from your website. It is convenient to them, and it lowers your costs.
Stop being nutty about invoices – give your customers a rich record of what they purchased, including details of arrival, items used, photos, signed acknowledgement by the manager, etc., and the invoice becomes a simple formality. When it is clear that value was delivered, the invoice can be a clean and simple statement of amount owed.

If these sound like upgrades you would like for your service business, we have good news. None of these changes to follow Amazon’s successful model are difficult or expensive. Don’t believe it? Ask some of our customers. There’s nothing really special about ServiceTrade other than the fact that we are copying modern capability from other industries and bringing it to you. You just have to acknowledge that you want to do business with your customers in the manner of Amazon.

Also read:
“Online Customer Engagement is Bad Yelp Review Kryptonite“

The Google Lesson for Service Contractors

About two weeks ago, Google (or Alphabet, if you want to be strictly correct) briefly eclipsed Apple as the most valuable company in the world. Apple is back on top today, but Google is much more valuable as a multiple of their sales to the stock value of the company. Google’s stock value is trading at a multiple of 6.34 of sales and Apple is trading at 2.24 (according to the Key Statistics section of Yahoo Finance). Why is Google so valuable? And what can service contractors learn from this value to enhance the value of their businesses?

It is easy to say that Google is valuable because they continue to grow at a pretty fast clip and they make tons of margin on their sales. Certainly these are true statements. I am more interested in the strategic nature of Google’s value proposition to the world. The mission of the company reads:

“To organize the world’s information and make it universally accessible and useful.”

So, if this mission has led to great value for Google users and great wealth for the shareholders, what can a service contractor do to repeat that trick? Perhaps part of the strategy as a service contractor should read as follows:

To organize the information relating to equipment performance, repair, and maintenance such that it is universally accessible and useful to my customers.

If you were able to accomplish this mission, do you feel that your company would be more valuable to your customers? Do you think you would hold onto them longer and be able to charge some premium above the prevailing skilled labor rate for services?

I can give you an answer if you are wavering. Your company will become more valuable when your company becomes more valuable to your customers. The best way to become more valuable to your customers is to extend your relationship beyond the telephone and the crumpled, handwritten invoice that you leave behind. When you use data to drive your services and when you put your brand in the palm of their hand through online interfaces (email and web), your company becomes more memorable and easier to engage . . . . and more valuable.

We call this concept of using data to drive services and going online with your service activities the “digital wrap.” It is how you make your business more similar to the business of Google – by organizing information such that it is more useful to your customers. It’s a great way to build a more valuable enterprise. Stay tuned for more stories on this “digital wrap” concept.

Also read:
Why Google’s Relationship with Home Advisor Matters to Service Contracting Businesses
Deliver More Service Calls to Get More Service Leads!

Rise of the Machines in Service Industries

A few months back, I wrote a blog post about the Tesla lesson for service contractors. Tesla has a direct-to-customer model for sales and service, and they support this model with a high tech connection to the car that allows them to deliver certain over-the-air updates while also monitoring the vehicle for proper performance. Every manufacturer in the world today envies Tesla’s sky high stock value, and they are all seeking ways to mimic their success and business model. This means that they are trying to use data and Internet connections to become more valuable to customers.

Last week, I was visiting with a ServiceTrade customer in the fire protection service trade. They informed me that they had found a good solution for collecting alarm inspection data to create the annual compliance inspection report for the fire marshal. I asked them who provided the solution, and they responded that it was offered to them by a manufacturer of alarm equipment for which they are a distributor. I asked further if they had checked into the ownership of the inspection data they collect with that equipment because it has been my experience that manufacturers are trying to displace the distribution channel wherever possible to get closer to the customer.

Sure enough, when my customer dug into the terms and conditions of the license that he signed for the inspection technology, he discovered that the manufacturer licensed the data collected to the owner of the alarm equipment, not the service company collecting the data. The license terms further stated that the alarm manufacturer also had a license to the data to assist the equipment owner in migrating the inspection and service work to a different service contractor than the one that had licensed the system in the first place.

WOW! As a service contractor, you have to be very diligent in protecting your direct connection to your customer. Your relationship in the future is going to be defined by data, Internet connections, and technology enabled services. You need to find applications that allow you to collect and own data that you put to work for the benefit of the customer and your business. Beware the rise of the machines. It can be a blessing, or it can be judgement day.

Looking for Great Customer Service? Try the Cable Company?

Everyone either cringes or laughs when they consider the track record of the cable companies in delivering customer service. Comedians have named their movies or even their whole persona (Larry the Cable Guy) in salute to the ridiculous nature of cable company customer service. But a funny thing happened to me this past weekend. The cable company did an amazing job delivering customer service to my family, and it was because they enjoy a unique advantage that they are finally beginning to exploit.

Everyone in my house was grumpy this weekend because the Internet service was miserably slow. I was dreading calling Time Warner Cable because I was certain there was going to be some lengthy and unsatisfying engagement that would ultimately result in some poor schnook being dispatched to my house and someone from my household having to deal with an inevitable amount of ineptitude. After their automated system discerned that I was indeed a customer and the nature of my problem was Internet service, I was connected with a pleasant woman in some foreign land.

Within one minute she had confirmed that there was indeed a problem with my modem that would be creating a slow experience on the Internet. She asked me if I had access to my Netgear wireless router that was connected to my Motorola modem. Now, they installed the modem, so it was not a huge surprise that they knew the manufacturer, but I had installed the Netgear router, and their knowledge of it surprised me a bit. She asked me to remove power from the router because she was going to reconfigure the modem to eliminate the problem, and then I should restore power to the router.

Within four minutes of placing my phone call, the person on the other end of the line had solved my problem because she could “see” into my equipment to diagnose and resolve an issue. I probed for what the root cause of the problem was, but the language barrier thwarted my curiosity as she was unable to explain it to me satisfactorily. I was, however, happy that my household was up and running at top speed again. The cable company enjoys a unique advantage in the form of their connection to the customer over their network. Given the ubiquity of the Internet, however, the uniqueness of this situation is going to be replaced by an absolute expectation that the service contractor have this type of visibility into the customer’s situation and a similar ability to resolve many issues without ever dispatching a technician.

The Internet can transform even the hapless cable company into a customer service monster. Any service company that embraces technology to deliver an amazing customer experience will find themselves leading the competition in the not so distant future.

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Online Customer Engagement is Bad Yelp Review Kryptonite

I found this story on “Yelp Terrorism” amusing. It seems that the owner of a Massachusetts jewelry store, George Pelz, was “terrorized” by an anonymous Yelp reviewer that claimed all manner of poor customer service, fraud, and malfeasance. George swears the customer experience is a “complete fabrication” by a “Yelp Terrorist” that is out to destroy his business. He sued in an attempt to get Yelp to disclose the identity of the reviewer, which Yelp has steadfastly refused to do. Yelp has in turn engaged their legal counsel in the wrangling to assure that “anonymous” reviewers maintain their right to free speech without any possibility of retribution by the reviewed entity.

George’s isn’t the only sad Yelp review story:
Portland Restaurant Owner Calls Out Yelp
Can You Be Sued if you Give a Bad Review on Yelp?
Obedience School Sues Yelper $65k Over Negative Review

None of this publicity is good for George or for Yelp. In fact, Yelp has been the subject of lots of bad publicity lately associated with the documentary movie “Billion Dollar Bully.” The movie alleges that Yelp has some business practices that amount to extortion – (mimic a northeastern mobster accent) “if yoos don’t pay up on these advertising fees you never know what type of poor reviews might hit your Yelp account tomorrow. Just sayin . . . .”

I do not recommend George’s tactics for combating Internet terrorist that are holding your good name hostage. The days are coming when the tolls paid to connect to customers will become higher and higher for those businesses that do not build their own online connection to their customers. Big Internet names like Yelp, Google, Amazon, Angie’s List and a whole host of new startups with massive amounts of venture backing are all focusing in on the service contracting sector (particularly home services, but the commercial folks can be assured they will be targeted as well) as the next big payday for Internet commerce. Uber showed that it can be done in the transportation services space, and now taxi companies are under the gun to figure out how to make up for all the customers they lost (and will NEVER get back). Don’t be like the taxi companies. Don’t lose your customers forever to a savvy Internet competitor (or terrorist). Get ahead of the Internet trolls by establishing your own online connection to your customers.

If you are not using technology to provide your customers with every opportunity to review and appreciate your service work, why not?

Do they get online notices to facilitate and coordinate scheduling?
Do they get online service reminders?
Do they get pending arrival notifications?
Do they see the work you performed in living color with photos and video in an after service online communication?
Do your quotes arrive online with a simple “Approve” button to bind them to your terms and your pricing?
Do they have an account with you to review and retrieve all of their service history so they don’t have to file it themselves?
Is it easy to launch a review or a request for service from any of these online service artifacts?

If you meet your customers online, eliminate administrative hassles, and provide great customer service, their happy footprints all over the Internet will overwhelm any potential “terrorist strike” on your business.

Don’t be like George. Surround the “online terrorist” with your own customer army that is engaged in perpetual service with your business. You will be living in the lap of luxury while the terrorists are banished to some Tora Bora cave in mountains of Afghanistan.

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Beware of “All in One” Software – The “All” will be “Small”

The demand for “all in one” software in the service contracting space must be high, because I see lots of vendors claiming to be such. These vendors proclaim to prospective customers that a single integrated system from a single vendor that performs every software function (customer service, accounting, time sheets, fleet management, e-commerce and so on) is the only successful software path possible.

Most are VERY SMALL, with fewer than 25 employees. Some are bigger with as many as 50 employees, but still TINY in the sense of what it takes to deliver a comprehensive software platform that provides “all in one” functionality. It is literally impossible in the modern, connected world of high frequency innovation for such a small vendor to effectively deliver even half of the software features that a service contractor should expect to run in their business.

Consider NetSuite. A publicly traded company with over $600M in annual revenue and more than 1,000 software engineers on the payroll. They claim to be an “all in one,” and you would like to believe that maybe, given their large size, they can pull it off. Now, take a look at the NetSuite partner page of applications that provide functionality that NetSuite cannot. Over 320 applications listed across 32 pages of partner apps. Huh? Wonder why such a large and successful company that markets itself as “all in one” (hence the “suite” name) needs 320 partner applications?

The answer is simple. No software company can stand alone to provide all your needs. Not even one as big and powerful as NetSuite. Not even Apple, the most valuable company on the planet. Here is a screenshot of my phone. Only three of the apps on that screen are provided by Apple. They all work nicely with the Apple technology, but Apple does not deliver an “all in one” solution.

Why is there not one simple button on my phone that says “All in One” for the weather, traffic, mapping directions, playing music, watching videos, transferring bank balances, trading stocks, monitoring my exercise routine? Of course, the answer is obvious. These are all very different apps that require a different approach to data and the user interface. In the same way that accounting is a VERY DIFFERENT application than customer service, with a different data set, different users of the data, and different user interface requirements.

What is the lesson in these observations about NetSuite and Apple? Both market themselves as being the “superior integrated system” that all consumers seem to desperately want. Yet both of them develop massive partner ecosystems to deliver the applications that they cannot.

Service contractors should seek software vendors that are the best in class for their particular solution: Customer service applications from field service management companies, accounting platforms, contracts management, fleet management, customer resource management (CRM), email marketing, and human resources to name a few. The initial setup of those integrated systems will make changing individual systems much easier in the future than a forklift of an “all in one” that seemed like a good idea at the time.

The lesson is that “all in one” is simply a marketing term to grab your attention because that is what you seem to be seeking, but it is misleading because it is not possible to have “all” from “one.” The lesson is that you should ignore the marketing, and instead observe the reality.

If a small company offers “all in one,” remember it is just a marketing pitch to get your attention. If NetSuite and Apple cannot do it, the small firm courting your business certainly cannot. Not even close. But it is OK provided that they behave in a manner similar to Apple and NetSuite and embrace partner applications that work seamlessly alongside their application.

I cannot fault a company for good marketing, but you can certainly fault them for locking you into a trap where many of your needs are not met because the “all” is very “small” and no partner applications are available because they actually believe their marketing hype. Ask about partners and application programming interfaces. If you get a blank stare, caveat emptor! The “all’ will be “small.”

Key Principles to Maximize the Value of Your Service Contracting Business

At some point, every business person or entrepreneur wants to be paid the full value for the investment of time, energy, love, and money they have made in their business. Whether that payday is an arms length financial transaction with an unrelated third party or a passing of the business to the next generation, everyone wants the satisfaction of believing the next owner is receiving something of great value. The principles behind maximizing the value of a service contracting business are pretty simple, but it is amazing how often they are ignored in the day to day decision making process regarding what issues get management’s attention. Keeping the formula and the principles for maximizing value in focus on a daily basis will increase your payday when you cash out, whether that cash is a financial transaction or simply a passing of the torch to the next generation.

The formula for value is simple – NC * (LVC – CAC) = VALUE

NC is the number of customers. Ideally you have many of them because having few is risky for the future owner. If they lose one or a couple, much of the value of the business is quickly erased. Also, business you receive from third parties (manufacturers, management companies, etc) generally does not count as value either. Without a direct, persistent, and meaningful connection with the end customer, your revenue and profit margin are tenuous and therefore not very valuable to the next owner.

LVC is the lifetime value of a customer. Ideally you get lots of predictable repeat business from each customer. If each customer is “one and done” with your services, your business is not worth much because you must sustain market advertising or other similar expenses promoting the brand to attract new revenue. As with having only a few customers, the future is risky when the new owner cannot depend on your current customer base for future income streams.

CAC is the cost to acquire a new customer. A strong and valuable brand will attract new customers at a lower cost because the marketing and sales expense is low when references, customer service, and brand reputation are strong. Fighting a trove of negativity in the market associated with poor customer service and negative reviews is expensive (high CAC). A new owner does not want to spend heavily on advertising because you have created a wall of negativity that must be climbed for each new sale.

If this is the basic formula for value, what are the principles for maximizing value?

Provide AMAZING customer service. Maximizing LVC means the customer would never think of using any other company for any service that you can provide for them. It means you get a greater share of wallet over a longer period of time. Price is important for each service because no one wants to discover they have been gouged when they share their experience with a neighbor. However, the experience and the ability to recall, review, and share that experience is critical, which means it must have an online digital component (a coffee and tobacco stained yellow paper invoice with cryptic accounting codes finds the trash quickly and will never be recalled, reviewed, or shared). If you have not figured out how to connect with them online using digital service artifacts that make it easy for them to review and recall your value, you need to figure it out and join the 21st century.

Amazing customer service also dramatically lowers your CAC. Advertising is an expensive approach to gaining new customers. The lowest CAC comes from referrals and online reviews that put your brand in the top position among prospects considering the services you offer. Make it easy for the current customers to rave about you and forward your digital service artifacts onto others or post them online. If you don’t understand that last sentence, hire someone who does and tell them you want to join the 21st century party that is happening online.

Manage and mine customer data vigorously for new service call opportunities to increase LVC. Your opportunity to sell more to an existing customer is directly proportional to how much you know about that customer and how easy it is to turn that knowledge into new service calls. A history of invoices in your accounting system does not count for any incremental LVC. How much data do you have about their property, equipment, and service history that you can act upon with computing resources to send them a tailored offer online for improvement? If this last question means nothing to you, hire someone that gets it and tell them to upgrade your filing cabinets to create digital treasure troves.

Finally, create a sales culture that leads to predictable year over year increases in NC. New customer additions should be an almost daily occurrence with a predictable formula and routine. When you can predict and bank on the addition of new customers and you can likewise predict that each customer will provide many years of income due to amazing customer service and the ability to mine data for new services, you have built a very valuable business.

The new owners will reflect the value you have built either in the purchase price or in a next generation debt of gratitude. Either way, your satisfaction will be substantial and genuine knowing you created something of great value by following these principles.

Google Wants Your Service Business, Too

If you are a service contractor, get ready for a tough fight to hold your customers and your service margins. Google is crashing the party. The same technology formula that wrecked your parts business is coming after your service business. Google bought Homejoy, an Internet technology company dedicated to the cleaning services market, this week to begin ramping up capability in services.

Anyone who sells finished goods or parts of any type knows how important it is to be good at the Internet thing. Ebay, Amazon, Google, and many others deployed massive amounts of capital to create extraordinary online experiences in comparative shopping, low cost logistics, buying assistance, and customer service. Any local retailer that was not extremely specialized or that did not have extremely strong brand or web presence either disappeared or became marginalized to the point where the business is simply a place to hangout and tell stories during the day.

The same competitive juice and technology savvy that hammered retail and finished goods is coming to the service contracting market. Amazon has announced local services. Google’s acquisition of Homejoy is another investment by the Internet giant in their quest to “wet their beak” and skim a little margin from every service dollar. When considered in the light of Google’s acquisition of Nest, the smart home technology company, Google is positioning itself to respond to every need for service in the home. They will know when the HVAC or appliances are failing, and they will source that lead to the service company with the lowest price and take a piece of the action. It’s not difficult to imagine that Google has their eye on acquiring other companies that provide monitoring equipment that can be used to turn the Internet of Things into service revenue. Your service contracting business is not safe from Internet-based competition any more than your parts business, so you better take steps to build a brand by using technology to create an endearing and enduring relationship with your customer.

The good news is that ServiceTrade and other modern technology companies have your back in this quest to build a premium service contracting brand. Connecting with your customers online and demonstrating your expertise and thoroughness in considering their needs during the service process will lead to an unforgettable experience. Technology will help you do it at scale without applying expensive office labor or distracting your technicians with senseless administrative chores. One more hint for you in your search for applications that can help you build this experience – they will not be extensions of your PC-based accounting application. They will be modern, cloud based, mobile friendly capabilities from companies like ServiceTrade and others like NearbyNow, PlotWatt, TinderBox, EchoSign, MailChimp, SurveyMonkey, Invoice Sherpa, and PipeDrive. Check out our ebooks on perpetual service and how to buy modern software to find some clues on how to embrace your future with a bright outlook.

The Rocky Road to Crazy Customer Loyalty – Practical Tips to Brand Freedom

No one can serve two masters, and sometimes the road to serving only one can be rocky and painful. This difficult transition was illustrated to me in colorful detail recently by a shrewd and successful service contractor in the kitchen equipment service industry. During the course of an entertaining conversation, I proclaimed that the role of the service contractor is to be the ultimate advocate and technical expert for the customer. This means the service contractor is the source of all truth and data regarding equipment and equipment performance, thereby enabling the customer to make the best operational decisions regarding what equipment best suits their applications and how to maintain it.

He replied (and I paraphrase here because the language was much too colorful to publish on this blog), “Well, that’s a fine theory, but it is not practical. If I tell the customer the truth about each piece of equipment based upon our experience and our service records, the manufacturer will cut off my supply of parts (and other parts of my anatomy as well). So we attempt to remain neutral and leave the customer to navigate the decision process on equipment purchases the best way they can.” I will elaborate further that he was not at all happy with this state of affairs, but a large percentage of his revenue is part sales, and the best margins are when they are purchased direct from the manufacturer (in some cases that is the only “legitimate” way to get the parts).

Practical or not, the transition to “customer” as the sole master of the service contractor is underway, and it is being driven by the Internet and tech titans like Google and Amazon. Very soon, the manufacturer is going to be forced to reckon with widely available information regarding part replacement pricing and sourcing that is going to push margins down to the minimum viable volume distribution margin (15 – 25% instead of 100 – 200%). Manufacturers will be forced to extend warranties and enter into the service business in order to preserve control over the equipment lifecycle and to build margin through service delivery. The service contractor that does not build a service brand that is valuable to their customer INDEPENDENT of a manufacturer’s endorsement will be relegated to low margin warranty and service repairs at the request of some other entity that owns the relationship with the customer.

So what should the service contractor do in the face of this reality? Clearly access to parts is critical, so building up a few relationships with large volume distributors that operate across manufacturer lines is important. Second, establishing programs that qualify technicians across multiple brands is necessary if the goal is to offer the broadest possible value proposition to the customer. In some cases, cooperative alliances with specialty service providers will be required where it is not practical to “own” that expertise within the service area. Third, the service contractor must have an independent sales capability to represent to prospective customers their “expert” value proposition – do not rely on leads from the manufacturer. Most importantly, it is absolutely imperative to establish customer service capability that collects and shares information with the customer so that the service contractor becomes indispensable in the decision making process regarding any equipment purchasing or maintenance decision.

Expertise, communication, and trust enable service contractors to build customer relationships that last forever and command a premium margin. When allegiance to a manufacturer erodes that formula for perpetual service, the customer relationship becomes tenuous and margins shrink. Smart service contractors will establish alternative access to parts along with business practices that expand relevance to the customer in order to replace the parts revenue and margins that will ultimately be worn away by the Internet anyway. Do it quickly before the manufacturers realize that they too must be in the service business in order to preserve their relationship and margins at the customer.

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Software Advice from Wall Street

There is a saying on Wall Street regarding investment decisions – cut your losses, dump your losers, double down on a winner. The basic philosophy comes from the concept of discounted cash flow analysis. It does not matter how much money you invested (spent) historically, all that matters is what you will invest (spend) in the future and how much cash will flow to you from that investing (spending). If a stock has declined since you bought it, and you are pretty certain nothing fundamental has changed to improve its future outlook, you would be crazy to buy more.

Yet this is exactly what many folks dealing with failed software implementations continue to do. If every experience has been negative, what has changed to make you believe future return on investment will be positive? Is the company behind the application a leader that simply has not yet broken out? Why is another dollar flushed down the drain going to improve the outcome? Think about how much money you would lose in the stock market with the following investment approach:

“I don’t care how much the stock price has declined. I am going to buy more because I have already bought so much.”

Buying more does not change the outlook – it simply accelerates losses. If you are convinced that your experience is an aberration, that the market is wrong, that the company behind the stock is really a high quality opportunity, that a rebound is inevitable, then there is nothing wrong with doubling down on a heretofore loser – you’re getting a bargain at the lower price. If you are not convinced of the foregoing, cut your losses and dump your losers. You are simply paying more money for more pain without the joy of future income associated with the investment.

Download a copy of the “The Practical Guide to Buying Software for Service Contractors” for further reading on making the right software purchase for your company.

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