Many English words that are used in a business context have numerous meanings. My two favorites are brand and manufacturing. Once we get past these definitions we will address the key question,: Can the OEM outsource customer service or must they provide it themself?
What Is a Brand?
When people use the word brand, they may be talking about many different ideas:
- A company, product line, or specific item’s name. (E.g., Xerox, Pringle, or Ford)
- A logo
- A product image
- An asset category
- A unique business culture or set of values
- Or what they usually mean – the thoughts about experiences and expectations that each person recalls when they hear a specific name. That is why you and I, Xerox, Pringle, Ford, Canada, and the United Nations, all are a brand. Just remember that the brand is unique to each person that has some interaction with you, the business, or the country.
What Is Manufacturing?
This word is not quite as confusing as brand. There are two definitions for manufacturing:
- The part of a company, either B2B or B2C, that transforms purchased material into a finished product that helps a buyer achieve a desired outcome without any further ongoing support or service. For example, Pringle turns water, potato flakes, and cornstarch plus a cylindrical package into a snack that we can buy in a store and satisfy our hunger or help us deal with stress.
- A company or operation, called OEM or Original Equipment Manufacturer, that manages and adds value to the following process:
The primary difference between a manufacturing department and an OEM is that the manufacturer makes and sells the product and the OEM sells and services the end product. For example, Ford is an OEM when it sells complete cars and trucks, but the manufacturing department delivers engines to other manufacturers after the sales department obtains the orders.
The OEM is all about post-sales service and support.
Can the OEM Outsource Customer Service or Must They Provide the Service and Support?
There is no hard and fast rule about how to provide service to your customers. There are two high-level consideration:
- If you outsource customer service and sales the OEM has serious financial benefits
- Dealing directly with the end users provides maximum insights and best control over the customer experiences.
There will be discussed below.
An OEM can have a partnership with one or more industrial distributors or agents who interacts with customers, obtains purchase orders and specifications, installs the finished product, and provides long-term service and support using parts purchased from the OEM.
Another approach is that the OEM sells to another OEM, who then incorporates the first item into a larger or more complex product that is sold to the end user (or maybe a leasing company). Frequently each OEM services and support its own products. The classic example for this arrangement is jet engines for aircraft, where the engines and airframes are manufactured and serviced by different organizations.
Now think about the last home appliance you purchased. The OEM manufactures items that are sold to a distributor, who sells to a local sales and service business, who sells to the end user. Or the OEM sells to a “big box” chain like Lowe’s, Home Depot, or Best Buy, who may then sell either to a tradesman for resale and installation or directly to the end user (the homeowner). Those chains also offer installation and service through independent tradespeople.
If you can think up a route to market, it has probably already been done.
Should I Always Be Providing the End Service?
As with most business questions, the answer is “depends on context.” This table provides a high-level view of the key issues:
Here is a brief discussion of the downside of not being the service provider. I think this situation deserves the most thought and analysis before going down this path.
Unless you are like the aircraft jet engine manufacturers or are collecting warranty cards from your end user customers, you probably do not know who has purchased all of your products. You cannot find out how satisfied the end user is with your product or the service they receive and you will lose the customer insights about their future needs.
That situation has a major downside — your name is on the equipment, so when the end user thinks about recommending or repurchasing another product from your company, you will be held accountable for their post-sales experiences. Thinking back to the opening section of this article, in the end users’ mind, your brand has been strongly influenced by actions that you cannot control!
If the service your end users experience from your extended go-to-market channel does not meet their expectations, you may be losing business without even knowing it was out there. The decision to either start or continue to outsource your end user services is not one to make without understanding the full impact of the decision.
About Middlesex Consulting
If you need additional input in making this decision discussed above, the author of this article can help you with your evaluation. Sam Klaidman is the founder and principal adviser at Middlesex Consulting. He helps his B2B product manufacturing clients grow their services revenue and profitability by applying the methodologies and techniques associated with the Customer Value Creation and Customer Experience professions to assist his clients as they design and commercialize new services and the associated business transformations. Contact Sam here.
Image credit: Image by Gerd Altmann from Pixabay