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Converting Field Service into a Profit Center
Five Ways to convert your field service operation into a profit center.
Posted Oct 10, 2000
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Customer service has come out of the basement and into the limelight.

Why? "Typically, customer support services have been basement activities, necessary evils," says Dave Golan, vice president of business development for the Applix iCRM solutions practice. "They were attributed as a cost of doing business--that's changing." The reason for this change is twofold: The first catalyst was the introduction of the Internet and e-commerce, which gave businesses suddenly more competition than ever and customers greatly expanding options. The second catalyst was a move away from the perception of field forces as liabilities. Businesses came to realize that managing their mobile workforces efficiently and effectively was their only option for keeping their customers loyal and, in turn, transforming their field forces from liabilities to gold mines.

"Historically, after-sales service was viewed in most manufacturing firms as a necessary supporting, but relatively minor, function in the overall role of the [organization]," writes consultant Donald F. Blumberg, president of D.F. Blumberg & Associates, in the report "Emerging strategic Value of Service as a Line of Business." He continues: "The first and most important conceptual step in understanding the critical value of service in the corporation is to recognize that service can be and is a separable, well-defined product with a measurable value in use."

Having achieved that understanding, consider yourself at square one: Turning your field force into a significant revenue generator is akin to running an obstacle course-with each challenge you overcome, you can be assured of plenty more to follow.

Be Efficient
The first step comes with the in-need-of-service customer reaching out to you. Bear in mind always the importance of customer loyalty--an element proven to be the essential glue in every business. "The positive effect on profit of more customers is overshadowed by the even more positive effect of more valuable customers," writes Patricia B. Seybold in her book Customers.com. "The longer a customer stays with you," Seybold continues, "the more valuable she becomes."

Guy Waterman, vice president of industry solutions for iMedeon, believes that Web-enabling, or customer self-service, is the first place you can begin to benefit many of your customers. Figuring in the amount of time a customer is left on hold while an operator searches for an appointment, "the cost associated with customer contact is typically gauged at $1 a minute, and the typical call center interaction with a customer is about 15 minutes per call," he says. "And don't you hate getting put on hold? You pay them money, but you still feel you have no choices. But if that customer could go to a Web site, the typical interaction-as long as the site is easy to use, find and navigate-takes about four to five minutes... that's a $10 savings per appointment."

Even more importantly, you've saved customers the aggravation of hold time and given them greater control of their account-that is, as long as you've also allocated enough pools of labor to cover your service area. This is one of several aspects where the correct software is vital for your business. When a customer requests an appointment that's already taken, the system needs to respond immediately with alternative times.

"The whole customer experience is improved through these productivity-enhancing tools, via the Web, to access somebody's field force management system," Waterman explains, "and [the Web] also enables communication with the company's customer information system. Beyond that...you want to begin assigning to particular trucks or crews [that] have the skills to perform the type of work that's requested."

Applix's Golan similarly stresses the point: "If you're going out on a service call and you've got a million dollars' worth of inventory in your truck but not the right inventory to do the job, what's the cost of having that machinery, and how else could it have been allocated where it would have been more appropriate?"

Practice Density
So now your customer has an appointment, and your Web engine has done the logistics management of allocating the worker(s) with the necessary training in a properly equipped truck; hopefully, it has also been programmed to consider routing optimization while scheduling. "We're enabling these people to be on site on time to meet the appointment, while the Web engine [is] sequencing these appointments so that I can get from one job to the next and not have to be worrying about my drive time in between," says Waterman. "Your farthest appointment away from your home base should occur about mid-day, so that you start making your way back."

This kind of thinking is what Blumberg refers to as "density," explaining that if you have to service 1,000 products, and half of them are scattered about and the other half are all in the World Trade Center, you'll clearly make more money with the latter half because of your reduced expenses-time being the most expensive element, even more so than labor, because it has the most value. "The more compact the units are that you're working on," Blumberg says, "the more decisions that are available to you as to what to do."

By practicing the most efficient use of time and labor, you've given yourself something to leverage. "If you can lower your costs," says Waterman, "the revenue that you can achieve in that service call should go up. Or, you can begin to lower your cost to your customer so that you can become more competitive...Ultimately, if I can beat my appointment time and the customer's satisfied, I can also influence my customer service levels and my customer loyalty... So, you're going to build that loyalty through [your] tools."

The technology that's right for your business will also red-flag opportunities for you to consolidate work processes, says Waterman. For example, if a customer calls for a water heater repair, but there was a trouble-maintenance check-up for the cooling system already scheduled for next week, the company can consolidate and schedule the jobs together, versus sending out two different crews. "start looking forward for other opportunities," he stresses, "not only to do work with that particular customer, but, if next week I have a job with Mrs. Jones and I'm already going to Mrs. Smith's house, if I'm in the neighborhood, wouldn't it make sense to try and plan an appointment at that time?"

The time savings that result from avoiding circuitous scheduling could make enough room for one more appointment per day, which, multiplied by the 250 work days in a year, adds up to serious profit. "Gartner[Group] is putting the price on each of those calls, or the revenue associated with them, at $320 a call," says Waterman. "If I could get a tool that would enable me to go from four to five, or five to six, [calls per day]...across a good size field force, say 120 people...that's $9.6 million. The reality is, if you can just make small improvements in many different areas, then you're going to see tremendous impact."

Be Well Equipped
Appointment, assignment, equipment: check, check and check. The next important steps begin before your field rep reaches your customer's door. "They need to know what the customer has as far as product from the company, what form of service level they have-all the different touches they've had from the organization-because the more they know about the customer, the better able they are to service that customer," says Katherina Tobias, senior public relations manager at Interact Commerce (formerly SalesLogix).

"That won't mean that I'm going to have 500 diary entries from the last 12 months on my WAP phone," says Golan, who also emphasizes providing reps with as much information as is valuable, "but it will mean that I'll have at least the last conversation that maybe initiated this activity. And, if I need to, I have the ability to go back and look at the other sets but in a follow-up initiation."

Software/hardware solutions that enable field workers to synch-up with the customer database back at the office (as well as share information bi-directionally) to gain a complete picture of the situation at hand are critical to being as efficient as possible. And because, via the technology you equip them with, your reps potentially have more up-to-date customer knowledge than ever before, they are able to better recognize and take advantage of upsale opportunities on service-level agreements (SLAs). Waterman prompts the question: "If I've got a field technician, and they're going out and performing work that I'm paying for-that creates revenue-how do the tools that I provide enable that person to do more?"

Blumberg's idea of density is, again, implicit here. "'We have an SLA for $40 for your refrigerator,'" says Waterman, proposing a hypothetical upsell conversation with a customer, "'but I see you also have a dishwasher and a microwave and an oven and a stovetop, and for those we can provide a one-year SLA for $119.' There's an opportunity for upsell there, and I think that's just a small piece of what you look at as revenue."

Dependability also creates upsale opportunities: "Some people call that performance-based rating," says Waterman. "That's creeping into the utility industry, where [field reps] are saying, 'I can guarantee you 99.8 percent uptime, with no noticeable disruptions to your power delivery, and that will come at a premium of an extra 20 percent per kilowatt hour. But if I don't meet that service level, then I drop to a rate that's 20 percent less than the going rate.' You should be very confident that your company has in place a service team that's going to maintain the network so that it doesn't fail...so that you can realize those increased levels of revenue."

The Blumberg report referred to earlier further acknowledges the value of dependability, saying that while greater equipment reliability will initially decrease the need for service or repair, it will ultimately make the user's dependence on the equipment more complex, placing even greater importance on your business's product and service.

Be Profitable
The idea of one's field service generating such a profit has turned business as a whole a little on its ear. As the elements that contribute to a successful field force come together, the field force gradually becomes its own entity, which a company may take further steps to more completely exploit. Blumberg's report states that "[service] has matured into a full and separable major business activity and function requiring a full array of management disciplines in order to effectively manage and control the business and achieve the revenue, profit and operational contributions...which are created by the existence of the opportunity." It's imperative to stay cognizant of your business' objectives in the grand scheme of things and to make adjustments toward those means as your business develops.

"Traditionally, when [one] wrote contracts," says Blumberg, "the first party was always the manufacturer, and the second party was the user. About 25 years ago, we began to see companies emerging that neither manufactured nor used, they just serviced....We called those people third-party maintainers (TPM). But when they couldn't fix things in the field, they had to send them back. That used to be done by the manufacturers, but of course the manufacturers didn't want to support these independent service organizations, so they denied them access to their depots...The TPM started moving into a new business, which, as an inside joke, they called fourth-party maintenance-maintenance and repair for the third parties."

Blumberg stresses that service can operate in four different environments:

Cost center: Provides a service to someone else; does not stand by itself but in support of another; runs against a budget; creates no revenue.

Contribution center: Provides a service to someone else; does not stand by itself but in support of another; may generate a small amount of profit.

Profit Center: Managed independently for the purposes of a business by itself; has most or full revenues.

strategic line of business: Run by an executive making her own choices and decisions regarding the abilities to best support products and generate revenues and profits directly from sales services.

"I'm constantly stressing the idea that service has to be viewed strategically," says Blumberg, "because even when you're running a cost center, you've got to start raising the question as to whether you want to move into a strategic line of business. There are horror stories [about] industries being run as call centers, and the top management doesn't understand what they do."

Once, he says, he was called in as a consultant for a company in which one of its operations was repair depots-22 of them sprinkled around the country, all being run as cost centers. The management looked at them as losing more and more money every day and so called Blumberg in to help sell them. "I asked them, 'How much money are [the depots] losing?' And they said, 'We don't know.' And I said, 'Well, then how do you know they're losing money?' And they said, 'Well, they have to be losing money--it's just cost!' But that's what they were: cost centers. Here's this operation that has no revenue at all; it's just spending money. We went in and looked at what they were doing and how much revenue they should have been given for what they were doing. Turns out, [those depots] were the most profitable business they had."

With so many factors to consider, the big picture is sometimes understandably the hardest to see, which is where Blumberg's emphasis on strategy may serve as an invaluable map of your potential pitfalls or profits. "When we brought the whole new story back to senior management," he concludes, "they not only changed their minds, they turned those 22 depots into a business of its own, and it became very successful."

Be Customized
Because the needs of every field force are unique, it's imperative that all the variables be considered before implementing any kind of hardware or software solution to tie together the aforementioned factors. Know your needs before you go shopping for a solution to avoid being swayed by technology or gizmos that have cutting-edge allure but not all the answers you need. Contact multiple vendors, but don't waste time listening to dozens of sales pitches: Go out looking for the solution provider that has what you need.

When most service organizations start the process of automation, Blumberg says, they make the error of going out into the field and finding out what software is available. "Each organization tries to convince the buyer of the greatness of their particular solution," he says, "as opposed to what the appropriate solution is for the organization that's saying 'I want to automate.' You tend to get easily pulled into tactical questions, which are driven by the character of the individual systems that exist."

iMedeon's Waterman agrees: "We want people to understand that there is value in implementing [a] mobile system beyond being able to put a PalmPilot in someone's hand and wirelessly enable it to find out where they are at any time, or give them new service orders, which a lot of people think is really cool technology...But from a solution perspective you're saying, 'What does that mean to me?' Focus on the business drivers that you can impact when you're looking [to implement] a system like that."

Also, don't make a final decision without hearing what your field workers have to say. The people using the equipment can certainly tell you what currently is or isn't working for them and the specific areas where they need more assistance. "[Make sure] that the interface is so easy to use that people are willing to use it," says Interact Commerce's Tobias. "That's the biggest hurdle sometimes with an eCRM solution-getting people to use it, to see the benefits of it pay off."

And pay off it will-if put together with the proper strategy, training and technology; consider it an equation. The combination of elements is inherently scientific, so take, if you prefer, the advice of Albert Einstein, who said: "Everything should be made as simple as possible, but no simpler." It'll be advice you can take to the bank.

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