By Bill Pollock, Strategies for Growth
Field Service Management (FSM) is big business – but, so is Warranty Management (WM)! And not just solely as a component of field service, but also as a stand-alone, or integrated, activity for product and services organizations alike. In fact, in most cases, FSM without WM suggests an incomplete solution for Field Services Organizations (FSOs)!
According to data just published in March 2020, MarketsandMarkets.com, the India-based market research firm, forecasts the Global FSM Market to grow from US$ 2.8 billion in 2019 to US$ 5.9 billion by 2024, at a Compound Annual Growth Rate (CAGR) of 16.2 percent. This would suggest a current (i.e., mid-year 2020) estimate in the range of ± US$ 3.2 billion. Their research is based partly on the assumption that, “The growing demand for mobility-based solutions to improve field operations, scaling field technician’s effort with the help of advanced technologies, and increasing adopting of cloud-based field service solutions are some of the major factors driving the growth of the field service management market.”
Warranty Management (WM) is also big business, as attested to in an August 2019 report cited by MarketWatch.com that values the Global Warranty Management System Market at approximately US$ 2.25 billion in 2017, and anticipated to grow with a “healthy growth rate of more than 14.42 percent over the forecast period 2018-2025.” As such, today’s global Warranty Management system market may be estimated as roughly US$ 3.37 billion – or similar in size to the global FSM market. Together, the FSM and WM markets currently represent a more than US$ 6.5 billion market.
However, there is more to Warranty Management than just “big business.” More importantly, it is a mechanism that services organizations can use to bolster their overall services revenue (and profitability) portfolios. The secret to success is to position WM in the organization as a value proposition for improving customer satisfaction and building a stronger competitive advantage. In most cases, an effective WM program can be built to help save customers money, while also generating enhanced (and more predictable) revenue streams for the services organization – a double “win-win” for both the services provider and its respective customers.
While the importance of effective warranty management is sufficiently validated by the respondents to Strategies For Growth ‘s (SFG) annual WM benchmark tracking surveys, a majority of warranty management solution users are not as duly impressed with the vendors that render them these services. For example, while a majority of 57 percent of respondents are presently satisfied with the services and solutions provided by their respective primary warranty management solution vendors, only a relatively low 22 percent, or just over one-out-of-five, say that they are currently “extremely satisfied”.
A similar percentage of users (22 percent) rate the performance of their primary warranty management vendor as “neither satisfied nor dissatisfied” – or what we would normally describe as a “complacent” user base. Further, an additional more than one-in-five users (22 percent) claim to be “somewhat dissatisfied”.
While on the surface, it appears encouraging that nearly two-thirds (63 percent) of respondents are currently running their warranty management operations using at least “partially automated” processes, this percentage is, unfortunately, not actually that encouraging! Only about one-in-four (27 percent) claim to have “fully automated” the warranty management processes currently in play at their respective businesses.
Further, while the current WM market base reflects one where, although 63 percent of respondents claim to be using at least “partially automated” warranty management processes, there is a near-equal amount (56 percent) where manual processes are still involved to some extent. There are also another 16 percent (or roughly one-in-six respondents) whose organizations have no formal warranty management process at all – neither automated nor manual!
The respondents to the survey also have identified the specific drivers that are pushing them to aspire to the attainment of higher levels of performance. They have provided responses that suggest that there are three main “clusters” of factors that drive their respective warranty businesses: Customer-focused, Product Quality-focused and Profit-focused – and in that order.
For example, among the Customer-focused drivers, post-sale customer satisfaction issues (60 percent), the desire to improve customer retention (43 percent) and customer demand for improved warranty services (40 percent) are the top three drivers with respect to optimizing warranty management performance – with post-sale customer satisfaction issues representing the only driver cited by 50 percent or more of respondents.
The next “cluster” of market drivers is Product Quality-focused, represented by product defect-related costs (28 percent) and dealing with inferior/deficient product quality (23 percent). The third “cluster”, Profit-focused, is composed of a single driver: mandate to improve service profitability (23 percent).
As such, the warranty chain management community has made it clear that it is squarely focused on, first, satisfying – and retaining – its customers; second, dedicated to ongoing quality improvement; and third, mandated to continue to generate profits.
Historically, the primary factors cited as driving the warranty management community to improve its operational efficiencies and overall performance have essentially been customer-driven; that is, with a focus primarily on meeting – and even exceeding – customer expectations for returns processing, claims processing time, availability of replacement units, and the like. However, the economic bust of a decade ago changed the way warranty management organizations think by shifting their focus if only temporarily, more to warranty-related cost issues. Still, the number one factor, overall, remains meeting their obligations with respect to keeping their customers satisfied.
In 2019/2020 and beyond, the focus has once again shifted back to the customer in terms of meeting (and exceeding) customer demands and expectations – or “back to the basics”. And so, it remains virtually inarguable, that on a global basis, Warranty Management is still big business – and if you are running a field services organization, WM also needs to be a major component of your business.