When you purchase a product from a company, you expect to receive a certain level of service in return for your investment.
Let's say your company bought a CRM database software. You're on a time crunch and need to run a sales performance report before you meet with the Vice President of Sales in three hours.
You select your report parameters, click the "Run Report" button, and … nothing happens.
Your report isn't generated, and you enter a state of panic. Luckily, you remember the CRM database software company has 24/7 live chat support -- and they promise to respond within five minutes.
You navigate to their customer support page, open up a new chat, and a customer service representative replies to your question almost immediately. They answer your question, resolve the issue with the report generator, and the report is ready in time for your meeting.
This is an example of a service level agreement -- the CRM database software company has a formal agreement with their customers to respond to support requests within five minutes.
A service level agreement (SLA) holds businesses accountable for providing a high level of service to its customers. SLAs are often used by IT and software companies to outline their commitments to the uptime and performance of their products.
But, what are the elements of an SLA? And how can you create an effective one?
Service Level Agreement (SLA)
A service level agreement (SLA) is an agreement between a service provider and its customer that guarantees a clearly-defined output. The primary focus of SLAs is to outline what a customer will receive. And the output can be measured both qualitatively and quantitatively.
When working with external customers, there are two service level agreement types you can choose between: a customer-based or service based SLA.
A customer-based SLA is an agreement that is specific to that customer and all the products and services they use. And a service-based SLA is one that applies to all customers using one specific service.
Key elements of a service level agreement include the following:
- Description of the service provided: What will the customer receive from your service?
- Reliability of the service: What is the expected uptime? And when is service provided?
- Response and resolution time: How long it takes to respond to and resolve an issue.
- Procedure for reporting: If there's an issue, what's the process of reporting it? And who will report it?
- Monitoring performance: Who reports on performance? And what performance information is provided to the customer?
- Penalties: What occurs if the service level agreement isn't met?
For a detailed breakdown of a service level agreement take a look at this SLA checklist.
Service Level Agreement Metrics
Service level agreement metrics vary depending on the service provider. The metrics that are used most often include uptime of the service, reliability, response time, and average breaches of SLA. Businesses can monitor these metrics to determine if they're meeting their SLA and if any operational changes need to be made.
Let's take a look at a few common metrics that are used to determine the effectiveness of an SLA.
- Uptime: How often is the product or service fully operational?
- Reliability: How often does the product or service break?
- Response time: How much time does it take to respond to an issue and resolve it?
- Breaches of SLA: How often does the business meet the terms of the service level agreement?
SLA Best Practices
- Under-promise, and over-deliver.
- Create priority levels.
- Specify availability.
- Procedures for resolution.
- Monitor performance.
1. Under-promise, and over-deliver.
Working with the customer is important, especially if you're creating a customer-based SLA. It can be difficult to create manageable terms that are agreed upon by both parties.
While you should be responsive to the customer's requests, you don't want to set their expectations too high and not be able to meet them. By under-promising, you have the opportunity to over-deliver and exceed the customer's expectations.
2. Create priority levels.
It's difficult to predict each and every issue that might arise with your product or service. However, try to think of a few common scenarios and determine how you'd handle them.
Give each of them an urgency or priority level. The higher the urgency, the quicker the response time. Add these scenarios, their priority levels, and expected response times to your SLA.
3. Specify availability.
When a customer encounters an issue, they don't have any time to waste scouring your site for hours of availability. In your service level agreement, outline exactly which days and times support is available for customers. Provide them with the channels they can reach you by (e.g., phone, email, live chat) and include an expected response time for each.
4. Procedures for resolution.
How will you respond to a critical issue? Your service level agreement should outline the steps that should be taken when something is critically wrong. The SLA will tell the customers how the issue will be resolved and how progress updates will be communicated to them.
5. Monitor performance.
If you're consistently not hitting your SLA targets, it might be time to reevaluate. Are the expectations you're setting too high? Or are there operational inefficiencies that are preventing you from hitting your SLAs?
Service Level Agreement Examples
SLAs can be applied to a wide range of services -- here are a few examples.
Information technology (IT) companies often create SLAs for their products and solutions. This example includes descriptions of the services provided, the service commitments, and the expectations for the service provider and customers.
In this helpdesk SLA example, it sets expectations around service availability and response time. Plus, it includes information about how the customer and service provider will work together.
This is a general service level agreement template you can use to create your own SLA.
With a clear SLA, your business will have specific goals and agreements with customers to ensure that a high level of service is provided at every interaction. To learn more, read about how to become an entrepreneur next.