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New product revenue shares may be on the decline for manufacturers, but aftermarket services can help businesses navigate economic challenges. According to Deloitte Insights, manufacturers are expanding into aftermarket services because they offer a higher margin and improve customer experience. On a global scale, Deloitte reveals that “the aftermarket business is about 2.5 times the operating margin from new equipment sales.” This makes aftermarket services a reliable go-to strategy throughout the economic challenges and future-forward growth.
Traditionally, manufacturers have viewed themselves as suppliers of equipment, not service providers, leaving aftermarket services on the back burner. This type of business model is strictly a transactional one. With the ever-changing market conditions, many manufacturers realize that a transactional business model is no longer viable and are seeking ways to improve their relationships with their customers.
Using Deloitte, Documoto customer best practices, and the Association of Equipment Manufacturers advisor expertise, we’ve found that manufacturers can stabilize their business and prepare for future growth by gaining recurring revenue streams and prioritizing relationship-building in the following ways listed below.
Deloitte indicated one significant revenue stream manufacturers are beginning to shift towards, and that is with service level agreements (SLAs). Manufacturers who guarantee product uptime before it is out of service to make a very compelling offer for equipment buyers. And those buyers will be more willing to pay a price premium to get it. Manufacturers should consider leveraging this opportunity to scale their aftermarket services capability more rapidly.
According to a Forbes article, “manufacturers produce more information than any other sector of the global economy consistently.” Equipment documentation offers an extensive range of information that can be repurposed to support or sell to existing manufacturing customers. Offering a digital representation of this information is a strategy that is quickly gaining traction with manufacturers so that they can efficiently and accurately assist customers in improving machine uptime.
Staying connected to customers ensures continuous support and business continuity. Equipment Manufacturers can gain a competitive advantage by switching to a 24/7 self-service model that customers can refer to for product updates, technical information, and pricing. This will simultaneously address customer needs as well as free up employees to work on other value-added services.
Aftermarket services offer Equipment Manufacturers the ability to support customers in different ways. Paraphrasing a statement from David Windhager, Senior VP of Customer Service & Digital Solutions at Rosenbauer Group, Windhager mentioned the importance of companies becoming solution providers. He also states that “the ultimate goal is to develop your organization in a way that you can sell solutions to your customers’ problems.” With this in mind, manufacturers who practice this can gain loyal customers and increase revenue. These strategies allow manufacturers to work closely with their customers and ease the pressure on equipment sales resulting in long-term incentivized relationships. The key to aftermarket service growth is the consistent delivery of services.
Want to learn how to utilize aftermarket services and deliver them consistently? Our aftermarket and customer success experts can show you how you can achieve this and more. Schedule a demo today!