Long-term contracts, contract extensions and easy contract renewals are every service provider’s dream. Instead of relying on the whims of a client, there are many proactive steps that a service provider can implement to bolster the likelihood of a client remaining with them for years at a stretch.
In this incisive piece, Saji C Sebastian, Principal Consultant, FM Future Labs examines the various factors that foster customer loyalty, and suggests several ways in which FM partners can engage with a client to strengthen their relationship.
Any relationship that is not built on commitment, trust and loyalty cannot be a win-win proposition. Businesses that are built on loyalty last longer and are more fruitful for all stakeholders. As facility management services are typically an annuity business, separation of engagement is very minimal during the tenure of the engagement. Thus, in facility management, customer loyalty would be a measure of a customer’s likelihood to do repeat business, increase scope of business or do additional business.
The right start
Having been part of many such facility contracting engagements, I have witnessed the entire gamut of the contracting journey, from RFP and service execution to periodic review and contract closure. The foundation of an engaging relationship is laid even prior to the preparation of the RFP i.e. when the scope and expected deliveries are spelled out. If the scoping is right, the right fit of vendor partners can be identified.
Longer is better
How the RFP is drafted plays a crucial role in ensuring that the relationship survives the complete tenure of the contract. Currently, most contracts are for a one-year tenure, extendable by another year. However, to have more mature relationships, the engagement should ideally be for a period of 3-5 years.
For a long-lasting partnership between a client and a service provider, I believe the following fitment boxes need to be ticked:
Scope & commercial fitment
Outsourcing facility management services for the right reasons is important i.e. engaging the partner for the service gap that the partner is going to fill, and not just to outsource tasks that “can be outsourced” as they are not so critical to the business , or a need to keep the workforce on a third-party payroll etc. If the reasons are more evolved, the engagement is more sustainable. Similarly, the contract termination will also not be for reasons such as “the tenure is now 4+ years and the workforce is due for gratuity”.
Identifying the right service partner becomes critical as the engagement will be for a longer tenure. So does evaluating vendor-partners based on their specific strengths – such as ability to operate in a certain specialised field, ability to cater to and at multiple geographies, ability to operate at scale etc. Thus, at the initial stage itself, defining the scope and reaching the RFP to the right fit of vendor-partners helps in making accurate techno-commercial comparisons.
The RFPs need to explicitly define the commitments at both ends. While most agreements define the engagement principle to principle, this understanding needs to go beyond legal clauses, and capture the spirit of joint ownership for the specified scope of delivery. This helps make the relationship lateral rather than hierarchical and ensures joint ownership for service delivery.
While the RFP and the agreement ensure that the necessary scope and relevant deliverables are well captured, they often miss out on including the expected day-to-day deliverables, which become critical once the project commences. This can only be avoided if a working document/operational programme is created by the service partner (preferably along with the client’s operations team), which defines details of day-to-day delivery and governance.
This document should then become the reference point for daily and monthly performance reports. This will help measure service delivery on the basis of data points that are measurable and tangible, and will help avoid performance yardsticks that are measured primarily only on the basis of relationship management.
Cultural & engagement fitment
Another key aspect of ensuring contract retention is having a clear communication channel amongst all the stakeholders. Service quality is determined by the difference between customer expectations and customer perception of the service. The key factors for bridging this gap are reliability, responsiveness, assurance, empathy and tangibles. A two-way communication channel that is robust helps implement the aforementioned values.
While most engagements have set practices of monthly and quarterly audits, the approach now needs to go beyond. The FM industry should adopt best practices from other industries such as third-party audits, mystery audits and customer surveys. Having a neutral understanding of ‘moment of truth’ audits goes a long way in ensuring customer delight.
The willingness and ability to listen and respond quickly will go a long way in retaining contracts. Though most service partners have some form of ERP/help desk tool to monitor service delivery, what is missing is a full-fledged control room to listen to customers and respond.
Service expectation fitment
There may also be differences between the business pitch and statements made by the company’s representatives. Gaps arise when these assumed expectations are not fulfilled at the time of service delivery. I always suggest keeping things realistic and following the mantra of ‘under-promise and overdeliver’.
Consistency is central
Once the premise is set for service delivery, it is critical that the service delivery remains consistent. Consistency in approach, regardless of whom the customer is connecting with in the organisation, is critical. The steady-state approach sets the right rhythm, which ensures fast and accurate responses. This is possible only if all team members are aware of the services expected, and are equipped to deliver this.
Training the team and ensuring availability of necessary resources keeps the team motivated, leading to positive engagement with the customer. A sense of ownership percolating through the training is critical for the FM industry, where services are spread across and the team is mostly at customer sites and locations. Maintaining a connection with them is only possible through constant training efforts which reach the frontline team.
Customisation is key
As the service provider grows and acquires more business, they may be unable to provide adequate attention to a customer, leading to limited ‘personalisation’ of services. The service industry is all about the customer being given a feeling of exclusivity; key account management is a step in this direction. However, they end up being only the SPOC and a channel between the client and the service provider. If the key account engagement can be further nurtured, this could play a key role in retaining all critical accounts.
If the customer and service partner engagement is beyond ‘greed and fear’, the relationship will last. Identifying the right fit and a commitment between the partnering organisations is the only way to a sustained engagement that’s fruitful and a win-win for all.
While most agreements define the engagement principle to principle, this understanding needs to go beyond legal clauses, and capture the spirit of joint ownership for the specified scope of delivery.
Though most service partners have some form of ERP/help desk tool to monitor service delivery, what is missing is a full-fledged control room to listen to customers and respond.
Signs of customer loyalty
- They are not actively searching for different supply partners for similar services
- They are more willing to refer you to their industry colleagues
- They are not open to pitches from competing companies
- They are more understanding when issues occur and trust you to fix them
- They offer feedback on how you can further improve your services
- They continue to purchase your services.