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How good is your ‘Service Reach’?

Published :Aug 2022

Research shows that over 84% of companies that reach out to their customers witness an improved business performance, especially in service. Industrial manufacturers make higher revenue and profitability by reaching for service than they do by selling products, systems or projects.

When companies are able to reach their customers directly or indirectly, there is an increase of 17% in customer retention, with a 147% greater chance of them outperforming their competitors.

This article is an attempt to look at the opportunities and challenges of ‘REACH’ in service and how it impacts the performance of an equipment manufacturing firm. 'SERVICE REACH' is more about how many products you can touch physically or connect remotely. Geographical proximity can be challenging as products get delivered across the globe.

Installed Base as the biggest Opportunity and Challenge of REACH in Service

Installed Base as the biggest Opportunity and Challenge of REACH in Service 

A few questions to industrial equipment manufacturers:

• Do you know the location status and condition of every asset you have delivered?
• Do you have up to date asset information?
• Is your service business plan based on your asset data?
• Do you capture full value of your asset lifecycle?
• Do you OWN your INSATALLED BASE?

The biggest challenge with manufacturing and project companies is the weak tracking system that results in a non-updated Installed Base. Companies delivering across borders, would find it more challenging when the delivery chain is complex, through contractors, system builders and agents or distributors.Acquisitions and mergers of companies adds to the complexity of maintaining and managing the installed base data.

Since each product goes through multiple channels of delivery, the historical data of the Installed Base gets lost in transit. When there is a lack of historical information about the product, there is also a lack of potential to convert the client into a repeat customer.

Installed base is a great driver of organic growth; but inadequate visibility of installed base is a limitation for industrial equipment manufacturers and system builders in fully utilising their installed base for revenue generation. Research shows that over 75 percent of an OEM’s customer base would get drifted over the years, if not nurtured well. A Forbes study shows how customers switching from one brand to another due to poor service has cost companies over $1.6 trillion in the US. Insufficient data about the product installed base impacts the overall profitability of any company.

Importance of having a solid Installed Base

When product movement, delivery, destination, channel information and client details are duly tracked and recorded, it creates a strong Installed Base data for a company. This helps the business build an organised database over the years, to have information about all their products and connect with its users – the end customers.

Most of the manufacturing companies do not hold information even about where their products go, which has become one of the biggest reasons for customer dispossession. Data suggests that over 50% of customer issues can be solved if the challenges of reach in service (through a strong Installed Base data) are conquered.There is a clear need to capture and update Installed Base data for companies to improve their reach to their customers.

Acquiring installed base data while delivering the equipment is possibly the easiest option to build up and update Installed Base data. But that does not happen most of the times. A few of the tried and tested ways of installed base data acquisition are:

• Devising own campaigns wherein OEM’s can get direct information about the products from their distribution and channel partners through surveys and real-time tracking.
• Digital campaigns that motivate their direct and indirect customers to connect (reach) with them on a routine basis.
• Motivating distributors through incentives ensures that all information regarding where the product goes (secondary sales data) is given to the manufacturer thus enhancing the quality of the Installed Base Data.
• Service Audits is another proven method of enhancing installed base data quality. This is a resource intensive activity, but when driven together with regular service calls and utilising the field service organisation, it could be cost effective.
• Barcoding of delivered equipment is also being increasingly used to map and track the installed products
• An Installed Base campaign inside the organisation to improve the awareness and responsibility towards ownership of installed base data will also help improve Installed Base Data quality. Ownership of installed base data cannot be just assigned to any single team or individual in an organisation. It is important that the business process ensures that the entire sales, order management and service organisation take ownership of installed base data at various touch points.

It is generally misunderstood that the installed base data is a service department need. This results in not utilising this valuable information effectively. The Installed base data can be an excellent source of information for equipment replacement sales, new product development and most importantly for knowing your customers. The Installed Base Data allows you to ‘OWN’ the equipment delivered by you.

How does technology play a role in Installed Base Data?

A combination of IT and non-IT solutions should be the way forward for creating and managing a good quality installed base data. Connectivity solutions have opened new ways of improving the service reach and harnessing the data base of installed equipment.

Installed base data management systems create a single platform of installed equipment information viz. location, asset status, details of services done, equipment upgrades etc. This platform allows migration of data from multiple ERP and legacy systems and consolidation. This effort, if complemented by non – IT initiatives could enhance the installed base data quality to about 95%. Once this valuable data is consolidated, it is easier to use business analytics and other business planning tools to improve service revenue in a targeted manner. Traditionally many companies have developed home grown systems, but today there are multiple options of Installed Base Management Systems, which could be customised to a great extent.

Equipment connectivity is another technology which is gaining lot of acceptance. The Covid pandemic accelerated the usage of this tool. One can draw a very close similarity to tele medicine in this practice.

Connectivity is extremely useful to track, the products, their current performance, service need, and to execute remote service and to depute the nearest service technician, if physical service is required, This substantially improves the service reach and response time.

One good example is that of a major heavy machinery manufacturer who has partnered with an IT major to establish a connectivity solution in place which tracks all their heavy machinery across country, which gives real time information on the location, working status, service requirement and even the fuel level.

Concluding the Service potential of industrial equipment

Providing exceptional equipment service positively impacts a company's financial (and overall) performance. A Bain and Company research across a broad cross section of industrial companies indicated that, service contributed 22% of total revenues and had an average gross margin of 39%—significantly higher than margins on most manufactured products.

Data also suggests that over 50% of equipment sales are recurring (wherein the recurring revenue is 70% of the business's total annual revenue) and maintaining the same and reaching out to the customers on time is only possible when the manufacturing company has ready access to a solid Installed Base Data . This results in the business delivering higher capital returns and consistently converting all its earnings into a free cash flow.

OWN your products and nurture them to reap rewards on customer satisfaction and bottom-line.

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