I recently rediscovered a McKinsey article, “How to make after-sales services pay off,” by Russell G. Bundschuh and Theodore M. Dezvane, that appeared in The McKinsey Quarterly, 2003 Number 4. Here are a few points from the article:
- “Manufacturers of everything from elevators and freezers to security systems and transportation equipment—products built to last—find that revenues from after-sales product installation, configuration, maintenance, and repairs are 30 percent or more of their total revenues, and the proportion is increasing. In some industries, the service market is four or five times larger than the market for products.“
- “The net result is that too many companies now price services based on little more than intuition… Part of the problem is that a services business is too often regarded as the poor stepchild of the core product group, so service managers aren’t given the resources to develop the right systems, tools, and incentives to maximize returns.”
- “For companies in maturing industries whose products are becoming commodities, raising revenues from after-sales servicing—as well as developing a more distinctive offering, which might persuade customers to buy a company’s products—should be at the top of management’s agenda.”
Interestingly, it is 17 years since the article first appeared, and nothing has changed. I still read, talk about, and see these same issues today, not in technology companies but in Industrial OEMs.
Customers are busy dealing with the effects of Covid-19 and trying to prepare for the new normal and don’t want to worry about maintaining production equipment. They are looking for help from their suppliers. Yet many OEMs are focused on solving the commodity product problem instead of solving their customer’s uptime problem,
If you are one of the 30% of OEMs not satisfying your customer’s needs for maintenance services, then we should have an introductory talk. Please get in touch with me at Sam Klaidman.
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of its clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization grow your service business, please get in touch with us or check out some of our articles and white papers here.
Be social and share!