tsia research: the art of renewal sales and marketing

333EXECUTIVE INSIGHT

The Art of Renewal Sales and Marketing

Maintenance and Support Contracts

SERVICE INSIGHT

SERVICE REVENUE GENERATION

October 2012

Julia Stegman

Vice President Research,

Service Revenue Generat ion

TSIA

TSIA-SI-12-016

© 2012 Technology Services Industry Association | www.tsia.com |

Contact Information

Technology Services Industry Association

17065 Camino San Bernardo Suite 200 San Diego, CA 92127

U.S.A. Tel.: 858-674-5491 Fax: 858-674-6794

[email protected] www.tsia.com

Table of Contents

EXECUTIVE SUMMARY .................................................................. 3

THE ART OF THE VALUE PROPOSITION ....................................... 3

THE ROLE OF SERVICE MARKETING/SERVICE PRODUCT

MANAGEMENT ................................................................................ 5

INCREASING STICKINESS .............................................................. 6

THE ART OF SELLING VALUE BY RANDY MYSLIVIEC .................. 7

TSIA RECOMMENDS ....................................................................... 9

ENDNOTES .................................................................................... 10

The Art of Renewal Sales and Marketing: Maintenance and Support Contracts

TSIA-SI-12-016

mailto:[email protected]

http://www.tsia.com/


EXECUTIVE SUMMARY

To optimize service revenue growth, we must master both the “art” and the “science” of renewing

maintenance and support contracts. In TSIA’s publication The Science of Renewal Sales and

Marketing, we communicated the current common industry practices that are proven to improve the

renewal of maintenance and support contracts. The industry continues to evolve its practices in this

area.

In this publication, we focus on the art of renewing maintenance and support contracts. TSIA’s

observation is that there are many processes related to renewal sales and marketing that are still

nascent areas for the majority of technology companies. The good news is these are areas where

significant energy is being invested, so we expect to see marked improvements in the art of selling

and marketing over the coming 18 months.

In this publication, we will focus on:

1. The art of the value proposition.

2. The role of service marketing or service product management.

3. Increasing the stickiness of your technology solution and support services.

4. The art of selling value.

THE ART OF THE VALUE PROPOSITION

Appropriate investments in marketing can positively impact the productivity of those responsible for

renewing maintenance and support contracts. Marketing plays an important role with ensuring:

The right support service portfolio is in place with services that customers need and will pay

for.

Effective sales tools are created that help the renewal team communicate the business value

of the support services.

In the SRG benchmark study, we asked technology companies if specific marketing practices are in

place and the responses are in Figure 1. The specific questions we asked were:

1. Did your company review competitors' value propositions to assess whether your existing

recurring service offerings are differentiated from your competitors' offerings?

2. For your existing recurring service offerings, is there a documented value proposition that is

used with customers?

3. Does your company use documented success stories and/or customer testimonials that

quantify the business value your customers are receiving from utilizing your recurring services?


95%

85%

75%

65%

50%

5%

15%

25%

35%

50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Review competitors to

ensure differentiation

Documented value proposition

Documented success stories

Validate value proposition with

customers

Document business case in

terms of ROI

Marketing Practices

Yes No

4. Did your company use a process to validate the value proposition of your recurring service

offerings with your customers to understand what's actually important to them?

5. For new service offerings, do you document the business case in terms of return on

investment for the customer?

Figure 1: Marketing Practices

Source: TSIA Service Revenue Generation Benchmark Q2 2012.

We think it’s fair to say that too many technology companies have not put their best foot forward with

defining a compelling value proposition for their maintenance and support offerings. It’s clear that,

historically, the service delivery organization has had a strong influence on what is in—and not in—the

support service portfolio. Many technology companies have been risk averse with the service

deliverables they are willing to bring to market. So by default, that leaves the most challenging and

“last mile” work to the customer’s IT department or channel partners. This internally focused portfolio

design might have been okay five years ago when the threats to maintenance and support revenues

were not as pronounced, but that’s a practice that won’t serve your company or your customers today.

The real question is: Would you buy your support services if you were your customer?

And what would be your perception of the value for the money?


THE ROLE OF SERVICE MARKETING/SERVICE PRODUCT MANAGEMENT

Given the percentage of company revenue represented by maintenance and support revenues, TSIA

recommends that it should be somebody’s “day job” to strategically steer recurring service portfolios.

In the TSIA SRG Benchmark Study, we asked member companies who is responsible for creating and

managing the support service portfolio. A total of 43% of companies responded that service

marketers were responsible for managing the support service portfolio, and this number is

increasing rapidly.

Whether you refer to this role as service marketing or service product management, we think it’s

strategic for technology companies to invest in this specialized role. While there are different focus

areas for service marketing versus service product management, we’ll use the term “service marketing”

to denote the person responsible for the support service portfolio.

Many service marketers are in one-of-a-kind roles within their companies. It’s interesting to observe

their heritage:

Some come from product marketing or product management backgrounds and are new to

services.

Some come from a role in the service organization but are new to marketing.

A small percentage have been in service marketing for many years.

We have created a TSIA Champions in Service Marketing group to facilitate the sharing of best

practices among this diverse group. The objective is to help our member companies’ accelerate their

ability to become world class with this critical function.

Service marketers can have a meaningful impact on both customer success and the growth of their

company’s service revenue. In particular, when adding new support services to the portfolio, they can

add significant value by:

1. Conducting a formal market analysis—designing the services from the outside-in.

2. Ensuring the value proposition is compelling and has been tested with customers before

launch.

3. Documenting the return-on-investment business case from the customer’s perspective.

4. Conducting a market assessment of the proposed pricing to ensure it is competitive.

5. Preparing the service delivery organization by participating in the engineering of new services.

If you are identifying missed opportunities in the market, are listening to customers, and are serious

about delivering more value to them, your service delivery teams will be uncomfortable with your new


proposed offerings. And if they aren’t uncomfortable, you’re probably not out-of-the-box enough. The

industry is shifting from providing primarily technical support services to providing both business

process and technical support services. And in many companies, this will require the customer support

and professional services teams to work together on converged support offerings. The question isn’t if

your company should do the same, it’s a matter of when you will make this transition. Customers are

driving this shift with their increasing expectations for realized value from technology and services.

Service marketers and service product managers that embrace the “art” aspects of their role are

striving for high impact and are not just going through the motions of a launch checklist. They are

stretching themselves and their organizations to deliver more business value to customers, even if that

means people within their companies are initially uncomfortable. Mastering the art of service marketing

is what gets you noticed in the market and will differentiate you from your competitors.

An emerging area where service marketers can also have a high impact is with increasing the

stickiness of your company’s technology solution and support services, which we’ll cover in the next

section.

INCREASING STICKINESS

As we communicated in the TSIA publication Pacesetter Practices for Renewal Sales and Marketing,

customer retention is a core strength for the pacesetters. In fact, 100% of the pacesetters have single-

digit customer attrition.

Some technology companies have naturally sticky solutions, which contribute to low customer attrition

rates. If your technology isn’t naturally sticky with customers, there are strategies you can deploy to

increase stickiness and reduce customer attrition.

For example, you could deploy an information service as a deliverable in your maintenance and

support contract that your customers value and wouldn’t want to lose access to. Here are several

examples:

1. If your company sells customer relationship management software, an information service

could benchmark the customer’s sales and marketing practices (i.e., length of sales cycle and

email open rates versus other companies in their industry). Your information service could

contribute to higher revenue growth for your customers by shining a light on sales and

marketing practices they need to improve on.

2. If you sell hardware to customers, an information service could track the assets a customer

purchased from you and provide regular reporting on the age, usage, serial numbers, etc. of

the assets. Think of the time you would save your customers’ IT departments and, therefore,

how your company would be contributing to the optimization of IT costs.


You can also integrate online services into your technology stack to make the technology stickier. In

TSIA’s publication The Implications of Consumption Economics for Service Revenue Generation, we

provide an example of an accounting software company that integrated a credit card merchant service

into their ERP software, specifically the module that automates the processing of credit card payments.

The win for the customer is:

1. The ability to comply with regulatory requirements (PCI standards) for credit card processing.

2. The reduction of errors and productivity improvements by eliminating the need for double entry

of credit card payments into two systems.

The win for the software company is:

1. Significantly higher retention rates for these customers given the automation of this error-

prone process that was also out of compliance with PCI standards.

2. A new service revenue stream (a percentage of every credit card transaction) that grew to 20%

of the size of the maintenance business in just 18 months.

Stickiness is really about how valuable the customer perceives your solution to be to their business.

How does your technology solution directly contribute to the customer’s revenue growth, cost

optimization, or ability to comply with regulatory requirements? And how much of your solution are

customers using versus sitting idle?

Make your technology and support services a solution your customers can’t live without.

We’ve covered a lot of ground with respect to the art of marketing. And there’s one more dimension to

mastering the art of renewing maintenance and support contracts that is a key ingredient in the secret

sauce: people who can sell value.

RTM Consulting is a TSIA business partner that has expertise with service sales and marketing

strategies with technology companies. So we asked their CEO, Randy Mysliviec, to share some

service sales strategies on the art of selling value in this next section.

THE ART OF SELLING VALUE BY RANDY MYSLIVIEC

The science of renewal sales is half the battle. The other battleground is the art of selling value versus

getting caught in a defensive price game. The art required for selling value is too often understated or

even ignored.

The typical renewal representative selling support services is taught many things like the product

being supported, the contract process, pricing, discount tables, special offers, selling disciplines, CRM


systems and much more. What is also needed in today’s environment to sell services based on value

(not price) are the soft skills that allow someone to sell more “why” and a little less “how and what.”

This is a skill set that is sorely lacking in the industry due to under-investment in soft skills

development of the renewal teams responsible for growing and protecting maintenance and support

revenues.

Learning the art of selling value requires building soft skills necessary to:

Understand the reasons why your service is more valuable to the customer. Too many

companies, or their sales representatives, focus on selling their version of value versus what

is valuable from the customer’s perspective. The key is for the sales representative to conduct

effective questioning and determine what the customer or the client perceives is of value to

them. And then present your solution in a manner that demonstrates that type or level of value.

A services client we recently worked with trained customer-facing service personnel on how to

talk more about results and benefits, and to stop talking about activities performed. The client

responses quickly became starkly different. Service personnel found themselves on the of-

fense with forward-thinking results and benefits information in their discussions, versus being

probed or even criticized for reviewing activities performed that did little to demonstrate real

value.

Move the conversation from price to value. This is where the “art” is really important. How

do you, in a convincing manner, gain agreement from the buyer to move price down on the

priority list? It’s not always easy but with the right approach, you can be effective. Particularly

since the process involves establishing yourself as a credible advisor on the matter and not

being perceived simply as a salesperson. This is in line with my earlier comment that the focus

should be on the “why,” with a strong bent toward value and benefits received.

Construct and communicate a clear and differentiated value proposition. Value proposi-

tions are made up of three simple components: (1) a clear description of the problem being

solved, (2) a clear and differentiated solution to the problem, and (3) a clear description of the

value to be derived from your solution. That value should be greater than what the customer

perceives they will receive elsewhere. In maintenance service selling environments, we see

renewal representatives quickly jumping to their price lists, bundling options, discounts, multi-

year agreements, or other sales offers to try to close a deal while ignoring why the customer

perceives the need for a lower price. Yes, everyone does want a lower price, but not if what

you buy does not do what you bought it to do.

Frame the price appropriately. The key to this step is that the price is presented in a manner

that keeps price in its proper perspective—it’s not the most important consideration. Ideally,

it’s coupled with some return on investment viewpoints to make the cost look more like a ben-

efit.


Position the offer competitively. Great positioning is done in a manner that makes it difficult

to compare what you do to someone else. Your positioning should make you stand out from

the crowd and should be described in a manner that is difficult to challenge. Create your own

unique positioning in the market for your service and provide the renewal sales representa-

tives with the needed messaging, sales tools, and collateral material to properly support the

sales effort. Third-party support services are growing rapidly because the barriers to entry in

this market are low. The ability to copycat your services is often too easy, including hiring for-

mer or current employees/contractors to accelerate entry into your space. With a recent client,

we were able to help re-define how a services operation positioned their services, bringing out

their unique attributes and helping the client understand what they were not getting from a

third-party offer. Business has rebounded for this client. Once the sales teams are educated

on how positioning helps win deals, they begin to develop the skills and experience to position

effectively in a sales environment.

These value-based, soft-selling skills will separate the leaders from the also-rans in the future of

support services. These soft skills can be taught, and they require practice and experience to

hone the effectiveness of how a sales call is conducted effectively.

TSIA RECOMMENDS

Customers have many choices and trade-off decisions to make with respect to how they invest in

order to achieve their goals. Maintenance and support revenue streams are critical to technology

companies’ financial health and can be a lever for significant revenue growth. So there’s a win-win

here: define and position your support service portfolio such that it’s clear to customers how your

company can help them achieve their goals—this is the art form of marketing and sales.

1. Make the investments in mastering the art form:

a. Hire a service marketer or service product manager.

b. Conduct a formal market analysis to ensure your company has a firm grasp on how your

customers define business value.

c. Invest in the development of your renewal representatives’ soft skills to sell value.

2. Service marketers and service product managers—be a change agent for growth!

a. Get comfortable with making others uncomfortable.

b. Use your market and customer insights to challenge the service delivery teams to:

i. Transition from providing primarily technical support services to providing both

business process and technical support services.

ii. Create synergy across the traditional silos of customer support and professional

services.


c. Collaborate with product management to creatively increase the stickiness of your

technology and support services.

3. Leverage industry insights to bring to market a portfolio that delivers superior business

value to customers:

a. Contribute to and learn from your peers in the TSIA Champions in Service Marketing.

b. Benchmark your current and/or proposed support offerings via the TSIA SRG Benchmark

Study.

c. Participate in the annual TSIA Emerging Offerings Survey.

We’re not done until we clearly understand, have documented, and can communicate how our

services help customers:

Grow their revenue.

Optimize their cost structures.

Comply with regulatory requirements.

That is delivering business value to customers.

ENDNOTES

Contact information for RTM Consulting:

Randy Mysliviec, CEO RTM Consulting [email protected] or [email protected] 513-236-5585 www.rtmconsulting.net

Related TSIA publications:

Read Pacesetter Practices for Renewal Sales and Marketing to understand the practices

associated with the industry’s highest renewal rates.

Read The Science of Renewal Sales and Marketing for insights on the foundational renewal

sales and marketing practices common across the industry.



http://www.rtmconsulting.net/