Establishing Interactive Services Partnerships
Requires Both an Internal and External Focus

(Originally published in the October 1998 issue of AFSMI's The Professional Journal; 1999 AFSMI Professional Writers Award Winner)

By William K. Pollock

Throughout the 1990s a new philosophy has been adopted by a growing number of organizations supporting the most demanding services segments. This is the philosophy of becoming an "interactive" partner with their customers, dealers and vendors by working closely with them to gain a better understanding not only of what products and services they use, but also how they are used, when they are used, who within the organization uses them, what impact downtime has on their operations and how they ultimately use their products and services to help them run their businesses.

The "Interactive" Services Partnership
An interactive services partnership must, first and foremost, be focused on the specific needs and requirements of the customer. It is widely cited that "the customer is always right", but it must also be considered that in every transaction, at some point, each party may actually play the role of the "customer". Just as in financial accounting, where for every debit there is a compensating credit, the same premise also applies to the customer-vendor transaction. In a strict sales situation, the demarcations are quite simple - the services organization is the vendor, and the end-user organization is the customer. However, in an "interactive" service partnership, these roles may oftentimes be interchangeable.

In an interactive environment, it is often the case that the customer will also attempt to "sell" a concept or point back to the provider, such as product design enhancement, service portfolio bundling, or contract negotiation. In a typical Users Group situation, the leaders of the group may, speaking for the entire group membership, be prepared to "negotiate" with the vendor organization on anything ranging from a series of service enhancement "suggestions", to a full-fledged "ultimatum" regarding the quality of services they are receiving. Clearly, in these cases, the customer has become the "vendor", and the provider has become the "customer." Like it or not, in an interactive partner relationship, the vendor/customer roles can change from day-to-day and issue-to-issue.

The question then arises, "How should we measure success in partnering?" While some organizations measure their success in terms of increased account revenues, increased levels of profitability, repeat service sales, higher levels of customer satisfaction, or increased levels of customer cooperation, any of these measures may be quite deceiving.

For example, account revenues may only be increasing due to higher pricing schedules or inflation. Increased profitability may be more a result of improved operational efficiency and economies of scale than of improved customer standings. Past studies have shown that it is generally easier for customers to continue using their existing services providers, despite deteriorating levels of service performance, than it is for them to spend the time, effort and money to find a new provider.

Apparently improving levels of customer satisfaction can also be deceiving. It has been somewhat facetiously stated that the best way to improve existing levels of customer satisfaction is to reduce the organization's level of service performance to the point where all of the "dissatisfied" customers are forced to take their business elsewhere. The remaining, albeit somewhat diminished, customer base will then statistically reflect higher levels of satisfaction left in the wake of the recently departed customers whose individual performance ratings had heretofore been negatively impacting the organization's overall ratings. However, this is just another way of "cooking" the customer satisfaction "books" to derive a desired statistic.

Even improved levels of cooperation with existing customers may also be deceiving. Some may simply be attempting a last minute effort to "cooperate" with their historical vendor one last time before finally switching to another vendor. Whatever measure of service partnership is being used, there may still be an inherent flaw in its ability to measure the "true" value of the partnership.

Further, some partnerships may be established and maintained for all the wrong reasons. They may be based on either fear (i.e., of losing the account), desperation (i.e., of generally declining market share, increased competition, etc.), or on a one-way need (e.g., to meet a sales quota or bonus situation). A true partnership must be based on the combination of management, marketing and economic considerations and not solely on convenience. Partnerships not based on mutually supportive needs will generally be "high maintenance", thereby forcing the vendor to be in a position where it is always playing "catch-up", constantly "stroking" the customer, and with altogether too many strings attached.

Once the vendor recognizes that it is no longer merely a reactive "order taker" for the customer's "break/fix" needs, and becomes more proactive in its dealings with the customer as a "sales influencer", it has made a giant leap forward. However, even a proactive market stance may still reflect a one-sided vendor-customer relationship. In a reactive environment the services organization simply waits for the customer to call to report a failure, and then it reacts. In a proactive environment, the vendor actively promotes its portfolio of services to the customer, but generally within the context of saying "here's what we have; what can you use?" However, in an interactive environment, the question becomes more, "what do you need; and how can we support that need?" - a very subtle change, but one that is a prerequisite for the foundation of any true interactive partnership. Figure 1 illustrates the differences between a reactive, proactive and interactive environment.

Figure 1

Interactive partnership also requires that vendors cultivate partner relationships with all of their customers, including internal and external customers; small, medium, large and key strategic accounts; new and older accounts; vendors and suppliers - all customers. The partnership must be real, and represent a "two-way" street. The partnership must be formed to benefit both parties in every case - not just one.

The Path Toward an "Interactive" Services Partnership
The path toward an interactive services partnership involves both an internal (i.e., organization) and external (i.e., market/customer) focus, and addresses three progressive stages of evolution (Figure 2):

Figure 2

  • Quality and Delivery
  • Satisfaction and Loyalty
  • Growth and Partnership
Quality and Delivery
Looking internally at quality and delivery, many services organizations may already have a service quality system, policies, processes and procedures in place to support their ability to deliver the levels of service and support that their customers require. Some organizations also rely on the structure provided by a Total Quality Management (TQM) process, while others utilize the discipline of ISO 9000 registration to provide them with the basis for a service quality system.

However, simply having a sound service quality system in place, in and of itself, is only half of the battle - making your customers and the general marketplace aware of your accomplishments will be of equal importance in communicating to the market that your organization is serious about its ability to deliver what it requires. Further, customers that already have their own quality systems in place may also seek services vendors that do as well.

Quality and awareness, however, are merely the prerequisites for moving forward. Beyond this, the organization must also be able to leverage its service quality system into a state of improved operational productivity that can, externally, then be made visible to the general marketplace in terms of highly-rated service delivery performance. A sound quality system will almost always lead to improvements in service operations, but attaining improved operational productivity and transforming it into superior service delivery performance will answer the market's more direct question of, "how do your internal accomplishments help me run my business better?"

Satisfaction and Loyalty
Satisfaction and loyalty also focus on both internal and external issues. In fact, many analysts agree that it is impossible to attain high levels of customer satisfaction without first attaining high levels of employee satisfaction. Employees are often the only visible manifestations of the services provider's offerings to the customer and, as such, if the employee is dissatisfied with his or her job, or the company as a whole, this dissatisfaction will also be quite visible to the customer. Customer satisfaction is not only dependent on market quality awareness and service delivery, but also on the perceived transference of employee satisfaction to customer satisfaction at the point of customer contact.

However, employee and customer satisfaction alone are not sufficient to ensure the successful development of an interactive services partnership. It is not uncommon for even highly satisfied employees to jump to other services organizations for higher pay, nor is it unreasonable to assume that highly satisfied customers will not switch services vendors on the basis of better prices, better contracts or better coverage. Therefore, even high levels of employee and customer satisfaction must be converted into commensurately high levels of loyalty. Without high degrees of employee and customer loyalty, even high levels of satisfaction may, in reality, represent only a temporary positive attribute for the services organization.

Growth and Partnership
The growth and partnership stage is the most important of the three in terms of its ultimate impact on the organization's "bottom line". However, it is highly unlikely that a services organization will even get this far without having first moved successfully through the previous two stages. As in these earlier stages, growth and partnership also has both an internal and an external component.

Once the organization has successfully moved through the earlier defined internal stages of the partnership process, it will find itself in a position where it has been recognized as having established the required operational infrastructure, implemented the necessary improvements in operational productivity and attained the desired high levels of employee satisfaction and loyalty. Similarly, on the external side, it will have fostered and promoted a position of market quality awareness, improved service delivery and high levels of customer satisfaction and loyalty.

As a result, the organization should now have enough internal capabilities and resources to support an ongoing process of service portfolio enhancement based on what it has both learned and accomplished to this point. The external, or market, counterpart to its internal achievements will be reflected in terms of increased customer reliance on the organization, its services and its people. All of these factors, in combination, will ultimately help to position the vendor as a truly interactive services partner to its customer base.

Summary
Being a successful partner in the services industry is very much like a marriage, corporate merger or other business or personal arrangement - it takes time, planning, resources, patience and understanding. It must also be cultivated and handled with care. The most successful services partnerships today are those where the vendor shows the capability to listen, learn and respond to the specific needs of its customers. Successful partnerships are not based on "luck", or simply being at the right place at the right time - they are more the result of setting specific partnership goals, following a focused plan and acting on the information that is learned directly from customers.

Becoming an interactive services partner requires a significant effort on the part of all employees within the organization, including a corporatewide mentality that fosters constant communications with customers, and each other, as well as close personal and departmental interaction. Good services partners will ask their customers questions before their customers have to come to them. Typical communications channels used by interactive services partners may include:

  • Scheduled and impromptu sales and marketing calls, and visits from regional sales/services managers
  • Direct mail, e-mail and company newsletters
  • User groups meetings and conferences
  • Vendor demos, workshops and seminars
  • Trade show booths, exhibits and open houses
Objective, third party conducted customer needs and requirements assessments and customer satisfaction surveys

Essentially, the more an organization knows about its customers, the more responsive it can be to their services needs and requirements. Becoming a "proactive" partner with its customers allows an organization to be a more responsive services provider. Becoming an "interactive" partner with its customers, dealers and vendors provides the customer with an organization on which it can truly depend, and the vendor with opportunities that it might otherwise have missed in terms of forming long-term, loyal business relationships.


William K. Pollock is President of Strategies For GrowthSM, a Westtown, Pennsylvania USA-based consulting firm specializing in business planning, customer service and customer satisfaction research. He may be reached at 610-399-9717 or via e-mail at wkp@s4growth.com.


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