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Pay for results growth | Outcome based service models

Updated: Mar 3, 2023

The ideology behind an outcome-based service model is that companies are selling business outcomes rather than just products. Take the case of selling in the equipment maintenance area. The Industrial Marketing Management says it like this: “a new business model of outcome-based contracts where the firm is tasked to achieve outcomes of equipment as a service contract instead of the traditional maintenance, repair, and overhaul activities.”

Basically, the service provider and the customer mutually agree on specific outcomes that are measurable and attainable and designed to ensure customer success. This service dynamic is therefore a win-win. Customers get the outcomes they want, and service providers know exactly what is expected of them.

Instead of simply providing products and services as a one-off occurrence, service organizations are slowly shifting to outcome-based services. Outcome-based services acknowledge the customer's wants and needs and provide value-driven outcomes based on those needs. Focusing on service outcomes could make all the difference in building customer loyalty and longevity while improving business bottom line.

Here’s why customers and business need outcome-based services:

1. Enhanced vendor relationships: Outcome-based service drives success for both customers and businesses because it creates sustainable customer relationships. Shifting your focus to predict customer's needs mean you and your ambassadors aim to create an environment of trust - taking care of the issue even before the customer makes a service request. This level of trust increases when the customer is involved in every step of the job, from dispatch to fix.

2. Competitive advantage: Focusing on long-term customer commitment edges out the competition. Outcome based transactions could mean years of customer loyalty as compared to an ad-hoc relationship. The chances to build upon services will only continue to increase from there.

3. Consistent quality: For quality to become synonymous with your service company, you must continue to set and meet business and customer standards. Use technology that gathers and stores customer data so your technicians can gain insight into on-going maintenance before their scheduled job.

Outcome based services pave the way for an industry-wide standard of quality that improves end-to-end customer communication, drives value, and increase revenue.

Here are five reasons why companies of any size should consider moving to outcomes-based models of field service to lead the next phase of industry innovation.

1. Model is Industry tested and globally approved: According to AIM Consulting, ⅓ of global manufacturing firms are servitized. Manufacturing is a natural and perfect fit for the outcomes model, we see it emerging across industries as a technology-driven alternative to traditional selling methods.

2. Investment in Customer Success results in Business Success: Companies that offer an outcomes-based model of service promise their customers to proactively service products. According a researcher at Ashton University, companies that move to the servitization model experience sustained annual growth of 5-10% and can realize a 25-30% cost reduction. By signing a contract that offers an outcome (ex. flight hours vs. engine parts). Customers can minimize costs associated with product downtime, strengthen field service operations and focus on growing other areas of their business.

3. Quality Becomes Synonymous with Service: Customers that subscribe to an outcomes-based model of field service raise their expectations of results from that service. Field service organizations are held to a higher standard because they are on an active retainer and must consistently deliver great results. Connecting assets and technicians through the latest technology (mobile, wearables, the IoT) is key to sustaining the highest levels of customer satisfaction and service today and will remain so moving forward.

4. Competitors Can Be Taken Out of the Equation: Moving to an outcomes-based model of service bonds providers and customers in a way that significantly increases the level of trust and partnership. The outcomes-based transaction can last up to years instead of the traditional one-off or ad hoc service organization/customer relationship. This strong bond shines a brighter light on the importance of field service organizations meeting and exceeding customer expectations.

The field service industry is assured to fundamentally transform the way companies do business and the level of quality customers expect from their service providers. Stay ahead of the curve and think about moving to an outcomes-based model of service today.

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