Michael Blumberg, President of Blumberg Advisory Group, shares with Sarah how he sees companies falter when it comes to successful marketing of services.
Sarah Nicastro: Welcome to the Future of Field Service podcast, I’m your host, Sarah Nicastro. Today, we are going to be walking through five biases that hinder effective service marketing. I’m excited to welcome back to the podcast today Michael Blumberg, president of Blumberg Advisory Group. Michael, welcome back to the podcast.
Michael Blumberg: Hi Sarah. It’s really a pleasure to be here. Thank you for having me on.
Sarah Nicastro: Absolutely. So as we progressed towards more advanced service offerings, outcomes-based service, servitization, all of those trends, the way that organizations market those offerings becomes increasingly important. And it’s also an area that can be challenging if we’re looking to do some things differently, more creatively than we’ve done in the past. So Michael, tell us a little bit about yourself and your background, kind of the way that you’ve collected your thoughts on this topic and why it’s a topic you’re so passionate about?
Michael Blumberg: Sure, Sarah. I started in this industry, this I call it the services industry, I think we all call it that, many decades ago as actually right after I got my MBA. In fact, actually I interned while I was going for my MBA and it was in a company that actually my dad started. And he saw in around 1985, that there’s this emerging industry called services, aftermarket services, product service and support. And he pivoted his consulting firm from being a generalist consulting firm to focusing on the service industry. And the work that the company did and then I did when I joined the firm was around strategy, coming up with strategic plans to move a manufacturer’s service operation from a cost center to a profit center. And I started working in market research. And then I progressed along in the company to doing strategy work and M&A and benchmarking and productivity, efficiency, improvement, and systems recommendations.
Michael Blumberg: But early in my career, I got my first experience of learning the difference between being book smart and real-world smart. And book smart was in the sense that when you go in for an MBA, you do your work, you do your research, you do your analysis, you make your recommendation. And the professor says, “It’s great. It’s good work.” Thank you. In the consulting projects we did, it was often involving the situation where a manufacturer, somebody in the manufacturer’s organization like the CEO said, “You know, we need to build our service business. We need to generate more revenue from services.” And we’d come in and we do a strategy for them and do quite a bit of market research to demonstrate there’s a market for their services and how’s it growing and who they be competing against. And often what would happen is there’d be somebody in the board meeting or in the meeting to senior management that said, “How can we do this?”
Michael Blumberg: Yeah, the data is there. Yeah, we’ll take the data and face value, but we’re struggling with growing our service business to begin with. We can’t get anybody to buy the services that we’re offering today. How is it you think we’re going to be able to grow? Even though you’re saying, offering new services and putting a new systems, what makes you so certain that this business is going to close?
Michael Blumberg: And I realized that at that time that it was more than just the data, there was a psychology behind it. And you might hear me say this, that 90% of successes is psychology and other people have said that too. And so at that point, I really wanted to learn as much as I could about why companies are having a difficult time marketing and selling their services and what they could do to be more effective. So we wouldn’t be on the strategy to getting into the tactics and the execution and a psychology about around how do you effectively market. And that actually become my passion and my lifelong journey is to learn and understand and help companies do it better.
Sarah Nicastro: Good. Okay, great. So from those experiences and the insights that you’ve collected over your time in the space, you’ve developed five areas of bias that can impact an organization’s ability to effectively market their service offerings. So we are going to dig into those and talk a little bit about each of those areas. So to start, let’s talk about what you refer to as the OEM bias.
Michael Blumberg: Sure, sure. Yeah, let’s unpack that. That’s the perception of the OEM that they have a captive market. The fact that they manufactured equipment, your customers should naturally buy the services. And unless you have established some competitive barriers and created a monopoly in the aftermarket, you don’t have a captive market. In fact, I don’t know about other countries, but in the United States, it’s a violation of anti-competitive practices and monopolistic practices if you have these barriers. So you can’t have them to begin with, so that’s the first part. You don’t have a captive market. And because of that perception that the OEM is a captive market, sometimes what happens is at the board of directors level or the CEO level, isn’t making the necessary investments in the service organization to grow particularly on the marketing side. They may very likely make investments in the technology to improve the operations to deliver a better customer experience, but not necessarily making investments in the portfolio design, in the pricing, in the go-to-market strategy.
Michael Blumberg: And that can often lead to another aspect of the bias is that the manufacturer discounts the competition. And ran into this quite often, when I began doing management consulting studies, strategic planning, studies around growing the revenue, we often ask the senior management, “Who do you think your competition is?” And quite often they’ll say, “We don’t have any,” because they’re only looking at it with this bias that says they are the manufacturer, they own the aftermarket. But as we get into the organization and start interviewing people in the organization, as we get even closer to the customer, like to the service technician level, they’ll say, “Yeah, we have competitors.” Their competitors are, they’ll say mom-and-pop service organizations or third party maintenance companies. So when we begin a study where we’re helping a company grow their revenue, we want to really dive into who are the direct competitors, but also the indirect competitors. That’s also something that companies can discount.
Michael Blumberg: Fifteen years ago, IT manufacturers and IT service providers would have never believed that Amazon would be their competition.
Sarah Nicastro: Right.
Michael Blumberg: It is, because Amazon as you know as cloud. So anyone that was servicing on-premise IT equipment were in for a real awakening a few years later as Amazon starting to take market share for them.
Michael Blumberg: Another aspect of the bias is that they view the service salespeople, whether they’re salespeople selling services or service people selling services as order takers. We’ll just make our offer. We’ll ask people if they want to buy and we’ll leave it at that. And when people don’t buy, what starts to happen is the management thinks, well, nobody wants it. Nobody needs our services. There’s no market for it. And that’s usually not the case. The difficulty is they’re not giving the customer compelling enough reasons of why they should buy their services.
Sarah Nicastro: Right.
Michael Blumberg: And the last part of this bias is though the management views past behavior is indication of future performance.
Michael Blumberg: I found one will make a recommendation about me changing the portfolio or changing what you say in the sales pitch or how you market it. They’ll say, “Well, we tried something like that before in the past, it didn’t work.” And what they tried was offering a service, but they didn’t look at all the complexities that are associated with it. So you really have to be open to changing, re-engineering, rethinking, repositioning how you market a service. You can’t just rely on past experience and look at the data. You got to look at what worked and also what didn’t work and see where you can tweak.
Sarah Nicastro: Yeah, that makes sense. I like the point you made about almost this idea of creating a self-fulfilling prophecy when it comes to manufacturers. Sometimes there can be folks within the organization that are a little bit skeptical about the role that service can play when it comes to strategic differentiation or growth. And by not investing in the sales skills necessary, the marketing of those services, et cetera, and then not seeing them take off, right. You can kind of feed that mentality inadvertently because you’re not really putting everything you need to in place to have success with what your value proposition is resonating and the way that it’s sold, like you said, being more of a trusted advisor instead of just waiting for someone to give you an order, et cetera. So, I think that it is important to think not only about the systems, but also about the skillsets and the strategic thinking that’s necessary to kind of balance that out.
Michael Blumberg: Exactly.
Sarah Nicastro: That makes sense. Okay. So let’s talk a little bit about bias number two, which is around service delivery.
Michael Blumberg: Yeah, sure. Again, a multi-part answer to that. The first part is that there’s the bias among the organization, mostly by the product salespeople because they tend to drive the organization and manufacturing. And that is that service is only there to support the product sale, not the fact that there could be a profitable stream of revenue from offering additional services beyond just the basic installation and maintenance and repair. And another one which I think is the biggest challenge and bias is that the failure of the organization to understand the difference between bad service and not enough service. We’ve done studies for our clients and we talk about them growing their service business, offering new services, expanding their portfolio, making investments.
Michael Blumberg: Someone in the organization with some level of resistance will say, “Well, we’re not doing a good enough job with what we’re currently offering. Why would they buy something else?” Or, “We can’t invest until we fix what we have.” And we’d say, “Well, how do you know?” And they say, ” Well, they tell us.” So, “How do they tell you?” They say, “Well, we ask one question about satisfaction.” And that’s not enough. And so what we’ve done is we’ve dug in deeper and often what’s really happening is the customer is not getting enough service. So what they’re saying, it’s bad service. What they really mean is they want more.
Michael Blumberg: I think a good example is let’s say manufacturer who’s not very mature. Their service organization is not very mature. They’ll might say, “We’ll provide you with field service, onsite service,” but there’s no service level agreement. They’ll say, “We’ll just send somebody out there at some point.” Right? And you dig a little deeper and say, “Well, industry standards next day. So we’ll try and get there somebody there by next day.” And that’s what customers saying they’re unhappy with, is because they would, if they had their druthers, they would like somebody there the same day, maybe even there with four hours. That’s really better service. But if you’re just asking a basic question, like how satisfied are you and not uncovering and digging deeper about what’s the cause of satisfaction. You might think you’re not doing enough. As a result, you’re investing more money, spending more money, it’s costing you more money.
Sarah Nicastro: Okay. So going back to what you mentioned about the perception that services only role is to support product sales, how do companies move past that perception?
Michael Blumberg: Well, I think it really starts with them doing a market analysis and understanding that there’s this huge revenue opportunity and a profitable one through services. So without that, I think it’s all academic, it’s theoretical to the management team. That should be more than just supporting the product. And also understanding that more services actually sell products. If a company sees your organization as offering great service or offering a value-added services or professional services, design services, productivity improvement services, they start to associate your company with the product. So when it’s time to get a new product or buy more products, they’ll have view is these guys do services so well. We should buy more products with them because we’re getting this experience from the services. Imagine what will happen if we have their products too, more of their products also.
Sarah Nicastro: So the ability to elevate the entire brand experience.
Michael Blumberg: Exactly.
Sarah Nicastro: Okay. All right. So bias area number three is around product. So let’s talk about that.
Michael Blumberg: Yeah. So for the less mature service organizations and manufacturers that have less mature service organizations, they tend to focus only on the tangible aspects of the product. And one of those is parts. Now we’ve all seen that servitization journey where it often starts with selling parts, but sometimes companies just get stuck on selling the parts and they’re not expanding their portfolio and giving the customer what they want and need.
Michael Blumberg: One example I have, it’s a horror story where we had a customer, a client who wastrying to build up their service organization, but they kept thinking it in terms of the tangible aspect of service the parts. And in interviews with us they said, “Our customers hate to see us coming into the door. They actually run away from our people because they think they want us to sell them more parts.” And like they said that, “Some of our customers, they’ll walk us to a closet and open the closet and see like a stockpile parts, because they can buy the parts that they don’t need.” So you got to go beyond just the parts, finding what services they need.
Michael Blumberg: Another tangible aspect is just focusing on the technician. And so what you have to be able to do is focus on the intangible aspects like the response time. Not just that you’re going to have a technician out there, but what are you going to get the technician to arrive? Focus on the uptime because that’s what they’re buying, in a way that’s an intangible. That’s a very difficult proposition to sell.
Michael Blumberg: It’s also tying into perception that when companies are buying services, they’re not just buying the reality. They’re buying the perception of what the service can do for them. Like uptime is a perfect example. One of the ways we try to explain that is you’re looking at other types of services, like a law firm, a lawyer. You might be sitting at home one day, maybe you’re ill. Actually people are sitting at home a lot now these days and they’re watching TV and they see an ad for a lawyer that it’s helping their clients with insurance cases or accidents. And we couldn’t have an image of that. In fact, we have a name for it. We call them ambulance chaser. Right? And we have kind of an image of what their office is going to look like, right? And then we have an image of what we might be watching the news and see high profile celebrity who’s charged with some crime and they talk about the dream team. And you could imagine what the lawyer looks like, how he acts or she acts and dresses and what he or she’s office looks like.
Michael Blumberg: You think it might be very plush luxurious whereas the ambulance chaser may have a storefront, iron cabinets, iron desk, an old-time style of a desk. And all of that is perception and that perception influences your choice. It influences the price you may have to pay and you may have to pay. So that’s part of the bias is understanding that if you’re going to deliver premium service, you have to deliver premium service. You have to be able to define what that premium service is. I’ll add a little bit more of this is that, in this product bias is that not understanding there’s a difference between the actual service and the capability to serve.
Michael Blumberg: So when you’re selling services and when people are buying, they’re buying both the reality, that’s the tangible part. That’s the technician going to be, that it’s the parts going to arrive, but they’re also buying the capability. So you have to be able to articulate in your marketing and sales messages what that capability is. How do they know technician is going to be there in four hours? How do they know the part will arrive the same day, or you have to explain.
Michael Blumberg: And as part of that, understanding that there’s really three inputs to this engine of service delivery. And again, the service delivery is both the capability and the actual delivery. Three inputs, there’s people, and those are the technicians. Those are the call center people. Those are the people in the parts warehouse. Then there’s the parts, right? Okay. And for many years in any company, we always looked at there’s material and people. And that’s all there is to the engine of production. But in service, we’re catching on now but we saw this 25 years ago that the other input to this is data. Okay. And now people are starting to understand the importance of data, but the data is an input. It helps you determine what you can sell at what price and how well you can deliver it. By looking at the data, you can find and identify new services to offer and even monetize those services.
Sarah Nicastro: I want to go back to the point you made Michael about actual service versus the capability to serve. So when you talk about the capability… I have an opinion and that’s why I’m asking you, how do you articulate that capability to your customer base in a way that will resonate well with them?
Michael Blumberg: Well, there’s a couple. One is what’s the promise? What’s the portfolio you’re offering them and what’s the promise you’re making? Another part to that is to talk about the service delivery infrastructure. What do you have that makes it possible, the one you show them. And I learned this a couple of years ago, well, many years ago where people started to evaluate the service organization based on whether they had a mobility solution, right? So that’s an example. That’s how to demonstrate the capability. Another one is define the process, explain to them what the process will be like, not only when they signed up for the service but when they need the service. Another part of this is testimonials. Giving testimonials, customer satisfaction scores.
Sarah Nicastro: Sure. Yeah. I think the customer testimonials thing is certainly important. I just wonder and I’m sure this varies industry to industry and I think also in terms of within your customer base, the persona that you’re targeting. But I think less and less do people care about the how, until you haven’t delivered on that promise. I think that that capability in terms of here’s what we can guarantee to you in terms of the outcome, the experience and the value to your business is the number one most important thing to clearly articulate and articulate in a way that is very simple for folks to understand. I just think with the ease with which we can attain outcomes as consumers today, I think people want the provider to take on the complexity of the how, and maybe aren’t as interested in that complexity unless it becomes important to them, i.e. things have gone wrong. If that make sense?
Michael Blumberg: Well, a couple of things, though, you have to pre-frame it because when things go wrong and they not understand how, then they understand why it might gone wrong and they’re more forgiving because they understand what was involved. And also you have to show them like, let’s look at Uber, right? Right now, if you didn’t know what Uber could do, you might still pick a taxi. Yes, call a taxi company to pick you up. But you know, it’s that experience that you have with Uber that you can take out your smartphone and see where driver is and who the driver is.
Sarah Nicastro: Yeah, no, I think the experience is very important. Okay. So the next area of bias that we want to cover is around the pricing.
Michael Blumberg: Yeah. So sometimes companies think that the way they’re going to sell more services is by lowering their price. And that might be because of a bias from the customer that when you ask them, why are they not buying the service? They’ll say, “Well, it cost too much,” right? And that’s what people always say, no matter what it is, whether it’s a product or a service, a car, house. If there’s no value for them, they’re going to say it cost too much. So you got to really be able to define the value. The other one is the failure to understand the value -in- use. So to be able to price effectively and not have to lower your price, you need to understand what it’s outcome going to do for the customer, right? Again, if you don’t understand that you get into debate, why is it cost so much? Can’t you lower that price?
Michael Blumberg: But if you get somebody there to the customer site within four hours, again, I like to use that example because that’s easiest one to understand. They’re going to save themselves a lot of money. They may save themselves a hundreds of thousand dollars an hour. So when you understand that they know you understand that and you can guarantee that I’ll get somebody there, they’re going to pay the higher price. But when you’re unable to do that, they’re going to knock down on price or they’re going to find something else. Some other reason why the price should be lower.
Sarah Nicastro: Okay. That makes sense. All right. And then the last area is around infrastructure bias. So what does that mean?
Michael Blumberg: Not making the necessary investments to deliver on the services. Some of these services that are available today like uptime as a service, for example, you need to have the infrastructure to deliver it. And so it’s almost a catch-22. Some companies don’t want to offer this service and generate greater revenue because they don’t have the infrastructure. Others have the opposite, right.
Sarah Nicastro: They have the infrastructure, but they haven’t…
Michael Blumberg: Yeah. They haven’t leveraged.
Sarah Nicastro: … created the service.
Michael Blumberg: Right. And understand that because they have the infrastructure in place, they can deliver the service.
Sarah Nicastro: Okay. So what type of infrastructure are we talking about? What do we think are the most important considerations around… Because to me, it seems less risky to have the capabilities and not have the service developed around them versus promising any sort of outcome and not being able to deliver that. I mean, that seems like a death sentence for an organization.
Michael Blumberg: Yeah. You do want to have the infrastructure to deliver all your promises. So I call it a smart tech stack, smart being for service marketing tech stack.
Sarah Nicastro: Okay.
Michael Blumberg: So you want to have your basic infrastructure in place which is your service management system in place. If your portfolio calls for offering uptime as a service or outcome-based services, you want to have remote monitoring and IoT so you can ensure the equipment is up and running. You want to have augmented reality solution so that if your technician is in the field and they run into a problem, they can resolve it quickly. So they’re not spending time searching for the solution. Depending on how large you are, I would add analytics, an AI to speed up the time frame which is required to predict and diagnose and correct an issue. Okay.
Michael Blumberg: Smaller organizations may not have enough of the data. If they have a very small installed base, they may not have enough data to take advantage of that technology, but as you get larger you want to have that. So that’s the foundation for service delivery and I think you and I would agree that that’s the foundation for delivering great customer experience. But on top of that, to market obviously you need a good sales CRM system to keep track of your customers and what they’re buying. You also want to have tools to configure pricing quote, your services. And you also want to have some form of marketing automation so you could stay in touch with your customer.
Sarah Nicastro: Okay. It makes sense. Good. So those are our five areas of bias that can get in the way of folks effectively marketing their services. So all really good points, any summary thoughts on this topic as a whole.
Michael Blumberg: Good question. I’d say that you got to keep working at it. It’s not just once and done. You have to keep reevaluating and refining your service offering and your marketing approach. And again, don’t overlook perception that there’s always a way to improve the marketing and that’s with anything.
Michael Blumberg: But I was just thinking the other day I was speaking to a client and they said, “We’ve launched a product as a service offering and we hear that’s what we should be doing. You know, that’s what the data says. That’s what the analyst says, but we’re not having people buy from us.” I said, “Well, why? And he said, “Well, because they turned the conversation into what’s the interest rate because they know that we’re going to finance the product through this as a service model.” I said, “Well, first of all, maybe that’s not a good idea to bring that up early in the sales process.” But more importantly, I asked them, “What are you offering or promising to your customer that’s going to make them believe that as a service, they’re going to get better value for their dollars on an OpEXand CapEX.. And he said, “You know, you’re right. We haven’t defined that.”
Michael Blumberg: So that’s what I mean by perception is you got to take a big picture view and you look at all the different angles and possibilities about why something’s not being sold.
Sarah Nicastro: Yeah. I think that for companies that have traditionally sold products, there’s some average product life cycle or lifespan. And I think that on the services side, in the pace of change is so fast in terms of that continual need to understand what your customers need, what will most impact their businesses or their lives and the different ways you can address that. So it does need to be a very continual process of staying engaged with your customers so that you’re designing and delivering services that are really created for them and continually looking for what those opportunities are.
Sarah Nicastro: I see a lot of companies that are having such great success with the closer they get to their customers, the more it starts to open up different channels of opportunity for them because they learn their customers’ businesses more. They look at areas of adjacency and they can see ways that they can kind of expand and progress what they’re doing. And it can be kind of a big hurdle to get over at first to think in more of this way. But once you’ve conquered that there is a lot of opportunity which is really exciting for folks.
Michael Blumberg: Yeah. And you mentioned something earlier that also, I want to add I found common is, you really need to be clear about the value proposition and that’s sometimes the problem is that they don’t define their value proposition very well. They say, “We’re going to offer a product as a service because that’s what we should do. That’s what everyone’s doing, but not defining it from the customer’s perspective, the planning in terms of what problems and pains this itself for the customer.
Sarah Nicastro: Exactly. Yup, I think that’s a very good point. All right, Michael. Well, thank you so much for being here today and for sharing your perspective with all of us. I appreciate it.
Michael Blumberg: You’re welcome, Sarah. And as always, it’s been a real pleasure.
Sarah Nicastro: Thank you. You can find more by checking us out at futureoffieldservice.com. You can also find us on LinkedIn as well as Twitter @TheFutureOfFS. The Future of Field Service podcast is published in partnership with IFS. You can learn more about IFS by visiting www.ifs.com. As always, thank you for listening.