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For OEM industries, after-sales service made up 50% of the profit and 40% of the sales (Deloitte, 2020). In the world of machinery and equipment, where every interaction counts, unlocking the potential of post-sales services is not just an option. It's a necessity that could redefine the way you view customer interactions and revenue streams. In this article, we'll explore:
- Maximizing After-Sales Revenue: Turning support into profit.
- Innovative After-Sales Monetization Strategies: Fresh, practical approaches.
- Leveraging Digital Tools: Using technology for exponential growth.
PS., have you heard of Makula? It's a SaaS that's changing how businesses approach after-sales service for the better. Think of it as your digital ally, simplifying complex processes and shining a new light on customer interactions, enabling you to find new revenue streams.
A. What are After Sales Services?
After-sales services are the support and care you offer your customers after they’ve purchased your product. This includes maintenance, repairs, customer support, and upgrades. For OEMs, post-purchase support is a strategic touchpoint. It's where they can demonstrate their commitment to quality and reliability, not just during the sale but throughout the product’s lifecycle.
After-sales support is vital because they're the cornerstone of customer loyalty and repeat business. Its importance in the OEM sector is also evident in its potential to increase a company's operational cash flows and reduce risk. The margins from providing these services are typically much higher than those from sales of new units. Some companies even build aftermarket revenue into their sales contracts, which contributes to stable and predictable cash flows. For Small and Medium Enterprises (SMEs), after-sales services are a key strategy for maximizing Customer Lifetime Value (CLV). By investing in after-sales, SMEs can significantly increase the lifetime value of each customer, fostering long-term profitability and customer relationships.
B. Why OEMs miss out on After-Sales revenue?
Companies that are invested in after-sales monetization can increase their revenue by 30% to 60% in just three to five years (McKinsey, 2019) Often, Original Equipment Manufacturers (OEMs) overlook the goldmine that is after-sales revenues. Caught up in the cycle of product development and sales, they miss out on leveraging this crucial phase for building lasting customer relationships and additional revenue. Let’s dive into the reasons behind this oversight and how addressing them can unlock new opportunities.
Transparency gap
A major hurdle in monetizing after-sales services is the transparency gap between manufacturers and customers. Often, customers are unaware of the extent of services provided through channels like WhatsApp, email, or phone. These valuable interactions frequently go unrecognized and unmonetized, leading to a missed opportunity to capitalize on the full potential of customer service efforts.
Redundant customer service
In contrast to major OEMs, many suppliers still rely on traditional customer service methods. They lack a digital solution or portal that accompanies the machinery, making service requests and tracking a tedious task for customers. This old-school approach not only hampers efficiency but also diminishes the customer experience, potentially affecting customer loyalty and repeat business.
Missed maintenance opportunities
The absence of a comprehensive overview of after-sales services often leads to overlooked repetitive maintenance events. This not only results in missed revenue opportunities but also can shorten the lifespan of the machinery. Without effective tracking and management, crucial maintenance needs may slip through the cracks, impacting both revenue and customer satisfaction.
Makula Insight: Makula streamlines maintenance workflows, offering advanced analytics to prevent missed opportunities and prolong asset life. Our user-friendly platform efficiently addresses critical maintenance needs, boosting customer satisfaction and revenue.
Inadequate feedback mechanisms
OEMs often miss out on after-sales opportunities due to inadequate customer feedback mechanisms. This lack of effective feedback channels means they miss valuable insights into service quality and areas for enhancement. As a result, they overlook opportunities for additional service offerings and improvements that could significantly impact customer satisfaction and revenue generation.
C. Digitization's impact on After-Sales Service monetization
According to one study, the EBIT for aftermarket services was 25% compared to 10% for new equipment (McKinsey, 2017). Digitization is changing after-sales services from a mere support function to a strategic asset. By adopting digital tools, OEMs can unlock new levels of efficiency, customer engagement, and revenue opportunities.
Reduced downtime
Downtime is a significant expense in various sectors, creating a critical need for robust solutions. This is where digitalization plays a game-changing role. By integrating digital tools, machinery and equipment suppliers can address the costly issue of downtime while opening up new revenue streams. Solutions like Makula are key in this change, offering ways to not only reduce downtime but also create additional sources of revenue. This strategy turns a major challenge into a profitable opportunity for both suppliers and customers.
Workforce productivity
The impact of digitalization on the workforce, particularly service engineers and technicians, is profound. By leveraging digital tools, their work becomes less stressful, increasing motivation and productivity. This improvement in workforce morale leads to better customer service, which in turn brings tangible business benefits. Enhanced service quality can lead to extended service contracts, upselling opportunities, and overall business growth. Digital transformation in post-sales support thus serves as a critical lever for operational efficiency and revenue generation.
Better customer engagement
By leveraging digital platforms, businesses can offer more personalized, responsive, and efficient customer service experiences. This increased engagement not only boosts customer satisfaction but also provides valuable data-driven insights.These insights enable businesses to tailor their services and products more effectively, leading to higher customer retention rates and the discovery of new revenue opportunities. Essentially, digitalization turns after-sales interactions into a strategic tool for deepening customer relationships and driving business growth.
D. Monetizing After-Sales Services: Key strategies
The industrial machinery repairs aftermarket alone is expected to increase to $405.6 billion in 2031 (Transparency Market Research, 2023). Monetizing after-sales services is a strategic move for OEMs, offering a pathway to enhanced customer satisfaction and increased revenue.
Data utilization
By utilizing data analytics and IoT technologies, OEMs can gain insights into equipment performance and customer usage patterns. This enables predictive maintenance, reducing downtime for customers and creating a continuous revenue stream. Digital platforms can also facilitate direct communication channels for feedback and tailored service offerings, ensuring that services are not only reactive but also proactive and customer-centric.
Developing tailored service packages
By analyzing customer usage data and equipment performance, OEMs can identify and develop service packages that address the unique challenges and requirements of each customer. This approach not only enhances customer satisfaction but also opens up opportunities for upselling additional services and parts, thereby increasing the overall value of each customer engagement.
Asset Management
A well-structured asset management system allows OEMs to monitor the health and performance of their equipment accurately. This is crucial for scheduling preventive maintenance, optimizing equipment usage, and reducing the risk of unexpected breakdowns. With comprehensive asset management, OEMs can pinpoint opportunities for upgrades and additional services, thus opening new revenue channels and enhancing equipment longevity and efficiency.
Optimizing Parts and Inventory Management
Effective management of parts and inventory is crucial for OEMs in enhancing their after-market services. This involves adopting a system that ensures the right parts are available at the right time, reducing downtime for customers. It also plays a key role in predictive maintenance, ensuring that parts are replaced or serviced before they fail. Implementing a robust inventory management strategy is essential for OEMs to minimize costs, avoid overstocking, and ensure optimal availability of critical components.
E. Enhancing After-Sales Services in OEMs: real-world examples
OEMs, with a deep understanding of their products and established partnerships, are ideally positioned to capture significant post-sales service value. According to a report by McKinsey, a power equipment manufacturer managed to achieve a 20% increase in aftermarket revenue and a 30% growth in long-term contract penetration by innovating its bundled offerings and developing new services (McKinsey, 2023). Another example is a global mining and construction-equipment player that refined its go-to-market strategy, leading to a 20% annual EBIT growth in its services business (McKinsey, 2023). These cases highlight how OEMs can leverage their unique position to expand aftermarket lifetime value through detailed analyses and strategic initiatives, often leading to impressive financial gains.
F. Monetizing After-Sales Services with Makula
Makula is transforming the way after-sales services are delivered and monetized. Here’s how it can make a significant difference:
- Premium After-Sales portal: Makula offers a white-labeled portal that simplifies service interactions. This portal can be a part of premium Service Level Agreements (SLAs), turning customer interactions into revenue opportunities.
- Facilitate Billing for every interaction: With Makula, billing for services like WhatsApp, email, or phone interactions becomes seamless. It provides a comprehensive overview of all services rendered, simplifying the process of monetizing your engineer’s time.
- Automated maintenance reminders: Makula ensures timely maintenance notifications are sent to customers. This not only helps in maintaining the longevity of the machinery but also creates a consistent revenue stream from regular service engagements.
G. Unlock the potential of After-Sales Service with Makula
We've journeyed through the pivotal role of after-sales services, especially for OEMs and SMEs. You now know that it's more than just a support function; it's a strategic tool for revenue generation and customer loyalty. Key takeaways:
- After-sales services are crucial for customer retention and revenue growth.
- Tailored services and effective feedback mechanisms are key for revenue generation.
- Monetization strategies in after-sales can lead to significant business growth.
- Real-world case studies demonstrate the revenue potential of effective after-sales strategies.
Imagine a tool that not only aligns with everything we've discussed but also enhances it. Makula is that digital ally in your after-sales journey. It streamlines processes, aids in monetizing every customer interaction, and keeps your service offerings on the cutting edge. By leveraging these strategies and tools, businesses can unlock the hidden potential in post-sales services, setting new standards in customer service and business efficiency.
