Service or no Service (But don’t make a mess in the middle)

::: nBlog :::

We’ve now lived in the countryside for more than 10 years, which has been perfect what comes to my personality trait of abhorring too much dependence on different service providers like utilities, housing companies, electricians, plumbers and such. Learning and doing almost everything by oneself what comes to living might sound burdensome, but for me it gives the mandatory peace of mind. I confess that it’s also very therapeutic.

Of course there are things regulated by the municipality, like waste management and sewage treatment. Also for air conditioning I’ve had a light service contract along which I’ve received two new particle filters per year, which I’ve changed myself.

The air conditioning system is from a reputable company and for 9 years, I received the filters and paid around 100€ against a yearly invoice. This year, however, filters suddenly stopped arriving, prompting me to call the company. Was this some kind of CRM glitch or what?

The truth was more amazing. The ongoing filter delivery service was no longer available, and as I’d be a consumer customer, they could not invoice me any longer. So they suggested that I go and buy filters.. from the hardware store. (I ended up finding the filter cloth manufacturer, buying the cloth with wholesale pricing and making the filters myself for the sturdy metal frames from earlier filters.)

Now this airco company had a perfect customer, me, who first spent close to 10.000€ to get their product and then continued to pay 100€/year without the company ever even thinking about me. It could be forgiven that not once did they ask if I wanted to service or upgrade my machine (I changed motor bearings myself), but to terminate a rock solid revenue stream from me is something I just don’t get.

The company is a market leader in the Nordics and likely has 500.000+ similar airco installations. By systematically serving my kind of customers well, their continuous service business would likely have surpassed their one-time hardware sales by now. And they could have started serving other manufacturers’ hardware too.

But, business is hard, especially when one needs to adapt to the digital and connected world. It’s all about modeling the product lifecycle from the customer perspective, and continuously offering new value based on real data – rigorously, but adaptively. Each airco installation is already different, so mass-customization would not be a new concept. The key is to maintain the continuous customer relationship with all the technologies available, as opposed to jumping on newest technical gimmicks. Over time, the customer profile and revenue potential becomes the product itself.

When gradually introducing service products next to physical ones and modeling the customer delivery process, it’s also very important to leave room for subsequent innovation based on observed and planned customer needs now and in the future. Therefore, one should always collect more data than what appears necessary right now, as it can be used to combine services and find products fitting to your well-maintained customer relationship. This innovation should happen right in the sales interface, not only deep in the R&D department.

As I’d like my airco manufacturer to survive also for the next 50 years, I’m going to have a serious discussion with their group CEO. Let’s see if we can create another example of a successful spime transformation.

PS. Our sewage treatment plant, an investment of about 8000€ also had a service contract during the first two years. Then the vendor’s distributor just vanished, so I studied the cleaning process for a while and serviced the thing myself from then on.


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