The importance of customer centricity and service delivery

Unit4 Enterprise Resource Planning (ERP), Professional Services, Global

from Unit4 Communications May 9, 2023 | 4 min read

Given the tightening economic climate, customer centricity and service delivery models are going to become increasingly vital over the next few years. Especially in the world of professional services, where the relationship to some extent is the service being delivered.

Professional services firms (particularly in management consulting) have made a business of giving great advice to their clients on how they should go about managing their service delivery, fixing customer processes, and the growth strategies they should be pursuing.

But how much attention do they pay to their own customer centricity? To customer loyalty, retention, and to investing in the tools they need to support their clients’ business success. And do they believe they’re taking it as seriously as they should? After all, the more you look after your customers (especially those already on your books) the more likely they are to stick with you.

The importance of customer centricity – as professional services see it

It’s clear that PSOs see customer relations as a core part of their operations, even if their ability to deliver isn’t always perfect. Client references remain the single most important KPI in the service market as an indicator of both organizational success and relationship quality. According to the 2023 SPI Professional Services Maturity Benchmark, they’ve dropped 3.5% in the past year. This should be extremely concerning to all firms, because client references aren’t just a great way of keeping tabs on performance. They’re also one of your strongest new business development tools.

Beyond this, NPS – despite being a blunt instrument – remains a solid heuristic for quickly determining levels of client satisfaction. And virtually every firm measures it in some capacity.

However, there are several other important KPIs of relationship quality that indicate whether service firms are embracing customer centricity as fully as they should be.

The customer-centric KPIs you need to pay more attention to

One of the most solid indicators of both market trust and your own marketing and sales effectiveness – as well as your ongoing relationship strength with existing clients – is average discount given across all clients and projects. Firms that discount less generally show greater financial strength, but also show higher levels of client satisfaction.

Contra what many firms may believe, regularly discounting your fees – even for repeat business – can actually be a sign of a poor ongoing relationships. If you’re pursuing a customer centric strategy, you won’t have to undercut yourself in order to win business.

Sales effectiveness also correlates closely with many measures of success – including many metrics of financial performance and service delivery effectiveness. Of particular note in the below graph, better sales effectiveness not only means improved EBITDA – it also means a more robust deal pipeline, higher annual revenue per consultant (the most important metric of financial success) and a higher percentage of projects which use the standard delivery method. This all indicates better sales effectiveness means smoother operations, higher revenue and profit, and a more secure financial basis for your firm.

Win-to-bid ratio also represents one of the strongest indicators of overall financial performance, and of the competitiveness of a company’s offering in the market. There is a strong correlation between this ratio and the effectiveness of both customer service and the quality of service delivery.

The service delivery process you need to improve your client relationships

Service packaging (also known as productization) represents one of the most effective but worst utilized processes for improving service delivery. But a near equal number of organizations have invested in a dedicated team and process for managing service packaging versus those who have no process at all.

The way your firm packages its service for clients reflects its care and attention for how companies view and buy the services you provide. If you aren’t investing in this process, you are very likely leaving money on the table by failing to align your business with the needs of the market.

Click to read Selling services with ERP – the view from 2023 (Gated)

Service delivery is all that stands between you and 60% margins

Successful service delivery maximizes your product margins and creates the groundwork for continuous improvement. Unsuccessful service delivery or execution, to contrast, can actually lead to negative profitability.

But successful service execution isn’t something that just happens – it depends on a careful partnership and alignment of sales, fee earners, your finance team, and the capturing and accurate analysis of project data to facilitate effective resource and project management.

And there’s always room for improvement

On-time project delivery was down last year compared to previous years (and project margins also fell slightly), reflecting the fact that there are still considerable challenges standing in the way of effective service execution for many firms.

Nearly 20% of organizations reported delivering less than 70% of projects on time. This suggests firms often don’t have the resource visibility necessary to correctly staff projects (and thus miss out on their margin targets.

Poor communication, miss-set expectations, lack of change orders, scope creep, and ineffective knowledge management and sharing are also cited as barriers to further service execution improvement.

But luckily, tech can help you solve this.