Blogs

Aftersales Service – a game changer for engineering equipment manufacturers

Published :June 2022

Product Life Cycle and After-sales service

After-sales support is as important as on-sales or pre-sales support, many times more important, covering the product's entire life cycle. Let us understand the importance of the after sales service in the product’s life cycle

After Sales service in the Introductory stage of the life cycle is only vocal and helps consumer understand the services they are entitled to when they buy the product. It helps them in the decision-making process. Stronger the service commitment, higher the perceived value of the product.

In the product’s Growth stage, Service refers to how industrial equipment managers decide to deal with the overall cash outflow and their demands of regular maintenance check-ups, commissioning of new equipment, installation, technical information and more. After sales service is important in this stage to track and show the product’s performance, reliability and lifecycle cost.

Market Maturity is the third stage wherein customers have already bought the product and expect after-sales services that meet and exceed the expectations. After sales is important in this stage to retain the existing customers and attract the new ones by establishing reputation as a market player with a strong after-sales support.

The last stage of Market Decline is when your product can see a decline due to the increasing competition and/ or the introduction of innovative products. After-sales support at this stage helps the product climb back up in the market by providing additional support features, innovative retrofits in the existing product, and price rationalization for all equipment maintenance-related services.

Service driving positive bottom-line

The Barometer study in the USA suggests that 61% of customers place high importance on quality customer service and are willing to pay as much as 9% more for the same product if they are provided with excellent customer care. In comparison, the same consumers in India are willing to pay 11% more on account of solid customer support. Service as a business model results in strengthened financial performance with over 10% more revenue growth and 23% higher profitability. Companies with superior service capabilities outperform companies with weak after-sales support in the industrial equipment manufacturing industry by at least 30%.

A comparative study of two multinational industrial companies, One the world’s largest construction and mining equipment manufacturer and the other a leading European pump and valves manufacturer drives home this point.

The Construction equipment major is working with a vision to ‘be the global leader in customer value’ and has services as one of its most critical strategic concerns. Robust talent, resources and time have been invested by this company over the years to streamline the after-sales service that has made them one of the most significant industrial equipment manufacturers globally, delivering an EBITDA% of 19.0 with an annual sales revenue of 52 B USD.

On the other hand, the European pump manufacturer which follows a vision to provide the most advanced engineering products and efficient solutions, but with a very traditional after sales service approach has a different financial result. In 2021, this company delivered an EBITDA % of 6 with an annual sales turnover of 2.8 B USD.

Service as a key factor in Net Promoter Score – NPS

The Net Promoter Score helps measure customer loyalty, which is responsible for predicting future business growth. NPS reflects customer experience during the multiple touch points in the customer journey with the organisation. Our experience of studying the NPS and customer expectations is that After Sales Service has a direct relationship with NPS as it builds a personal connection between the brand and its customers.

90% of customers state that strong customer service influences the NPS score positively. Higher the interaction with a service agent, higher the NPS score given by customers to the brand. This happens because the after-sales service helps customers deal with any product related issues and get the best out of the product. Lack of good service affects customer loyalty and retention with a negative impact on the business growth.

Service as a differentiator

Service is one of the most vital differentiators for a company as a customer remembers the service provided more than they remember the product or its price. According to a Forbes study, businesses in the US lose over $75 billion every year due to lack of efficient customer service. The study also revealed that customers do not mind spending even 17% more for products from companies that offer efficient customer service after the purchase.

Oracle’s Global CX Insights Report also shows that the primary focus of 90% of businesses is now on overall enhanced customer experience. This is because customer service results in higher customer retention, satisfaction and enhanced business profits. It is also proven that customer-centric companies are 60% more profitable than companies that do not work strongly towards improving customer experience.

Customers experience the real value for money, when they get excellent customer service. Differentiation between competitors and substitutes is often made on the basis of the services provided by the brand during the product lifecycle. More than 65% of customers surveyed in a study have accepted the fact that they are willing to leave behind a brand that does not provide unparalleled and solid after-sales services.

Service vs maintenance support

After Sales Service is a more holistic approach towards customer care and should not be confused with maintenance support. Maintenance support is more inclined towards taking care of the product on a periodic basis to upkeep its mechanical performance, whereas Service refers to a lifecycle support. While it is possible for third parties to provide maintenance support, service remains as the responsibility of equipment manufacturer. Strong service helps companies earn a better life cycle revenue and build their clientele through high goodwill created through word of mouth.

Service transformation

Design and delivery of SERVICE for industrial equipment is undergoing major changes driven by technology and market demand. Management of this change requires transformation of service products, service delivery and service organisation. The key steps are, creating a Service STRATEGY, improving the PERFORMANCE and managing the TRANSFORMATION.

The present-day customer is demanding this transformation. They look for a seamless experience and added value from every purchase. To meet these increased demands, businesses need to update and adapt quickly. Many are struggling to deliver the enhanced experience, and this could be detrimental for their very existence.

For more discussions on consultation on this topic, please connect with anantha.padmanabhan@camsconsulting.in / www.camsconsulting.in