"Digital? I don't need that s#%t. I compete on price."*
*Actual Prospect Quote
Digital (‘over the internet’ commerce) affects everything we do, what’s interesting is that service delivery has resisted digital influence / transformation; only 5%-8% of service transactions occur with online or digital interactions.
To think about how much has changed, consider what ordering a pizza what it used to be like, and what it is now:
As you might guess; a 20X reduction in customer effort had a massive impact on sales & profit, how much?
Dominos outperformed Apple, Facebook, & Google (the closest competitor by 40%!) in the last 5 years. Their performance is especially curious when you observe they outperformed Papa Johns (yellow line) by 8X over those same 5 years.
Digital made a big difference. Dominos led with customer experience and digital, Papa Johns tried to compete on product, product isn’t enough when all of the products are very similar and hard to differentiate.
Why are services so resistant to digitally transform?
At first look, on-demand home or commercial services are complex to deliver ‘over the internet’ because:
1. ‘Job-done’ resolution is subjective,
2. Delivery is fragmented into many companies
3. The job typically needs to be delivered on-site
4. Services delivery is bundeled into ‘trips’
Where have we seen this before?
Dominos recognized that it is difficult to compete good pizza vs. good pizza, so they unbundled the customer effort and made it as easy as possible to order. Along the way in their digital journey, their revenues and profits skyrocketed, they realized that the product had to be good, and the experience had to be amazing.
Unbundling customer experience
In September 1991, one of my (still) favourite bands, Guns n' Roses, came out with ‘Use your Illusion I & Use your Illusion II’. Both CD’s had about 15 songs on them, but really all you really wanted to listen to were the hits, “Don’t Cry”, “November Rain”, “Live and Let Die” on I, and ‘Civil War’, ‘Yesterdays’ and ‘You could be mine’ on II. In effect, I paid 5X more for the 6 songs I wanted because really only wanted 20% of the bundle.
You know how this turns out, Apple Itunes Store comes along and now I can just buy the 6 hits for $6; then Spotify came along and now I pay $10 per month and don’t have to own any of the songs or albums. The value to the customer infinitely multiplied, we only buy what we want, and with streaming, we now consume what we want—we don’t even buy anymore.
Unbundling your customer experience
In the service business the customer pays many things they don't want because of trip ‘bundling’.
Lets explore a window washing call, this could be any call for any on-demand service:
Things get even more expensive when we consider the costs for failed ‘bundles’, because these are all included in the cost to deliver the wins; let’s say our window washer wins 33% of the work they bid on:
Quote 3: Win
135 mins Total / 45 mins Performing service
When you add the effort for the losses, it is really 55 + 55 + 135 = 245 mins for a 45 min job, so 245 / 45 = 5.4X the effort to deliver the service.
The customer's price needs to cover 5.4X the effort, this isn’t sustainable, so when we hear customers losing jobs on price, we find they are focusing on the price of the 45 min job execution. The biggest opportunity is to figure out how to cut the costs and time of the quoting or qualifying, (or inspection, or quality assurance, or warranty) because that is their biggest cost to operate. In the 3 quote example, quoting 'cost' the window washer 160 minutes for a 45 minute job.
Identifying the costs to delivery for the whole process is the opportunity to unbundle services from the ‘trip’ bundle.
Unbundling your service bundle
When we work with our customers on 'unbundling', the first place to start is look at truck rolls, they are a very expensive part of on-demand service delivery, are often unnecessary, and cost your business time and business cycles.
But wait a minute, I charge for truck rolls--
Yes, and that is an important part of your business, so if you can eliminate the truck rolls where service isn't being delivered (quotes, inspection, warranty) you can accelerate your business to even higher revenue.
How your revenue can multiply
If we look at our window washer example, lets say that they charge $100 for the 45 min window service, currently the revenue rate is about $25/hr. ($100/245mins)
If our window washer can eliminate the travel for the quote trips, the revenue rate jumps to $66/hr. ($100/85mins)
"I don't know how they do it"
Now let's say that our window washer only travels to winning bids, in that time they did the 3 quotes, the window washer's revenue is now $265. Our window washer revenue just increased by 4X. If our window washer really wants to get competitive, they lower the price to $90, they don't mind, because for the 3 jobs, they are making $180.
His competitor that is driving to all the quotes shakes their head "I can't compete at that price, I don't know how they do it" because they are barely covering their costs at $100 per job.
How ICwhatUC can help?
ICwhatUC specializes in helping on-demand service companies move to digital. We help our customer's sales, service and warranty departments build digital use cases by reviewing their customer facing business processes, connecting every activity with customer value, and by using technology to eliminate trips.
Below is an example of one of our customers monthly summary.
If you are interested in hearing about how we can help transform your business, please signup or drop us an email at firstname.lastname@example.org