How to gain a profit advantage with guided selling of Aftermarket Services?

After a couple of difficult years, manufacturing is rebounding in the U.S. and around the world. Undeterred by significant labor and supply chain challenges, the manufacturing industry is building back fast. The recovery gained momentum in 2021 on the heels of the COVID vaccine rollout and since then worldwide manufacturing markets have seen consistent and rising demand. Customers are consuming again, so there’s a lot to be optimistic about in 2022 and beyond.

But for many industrial manufacturers, optimism regarding revenue growth is softened by a nagging fear of the ongoing risks and uncertainties. Workforce shortages are a challenge across all sectors and supply chain disruptions continue to add unexpected delays and escalate costs; testing any organization’s ability to adapt and innovate. As a result, leaders today are not only looking for ways to defend against current disruption but also to gain and sustain market advantage moving forward.

Seeking Profit Advantage

One way manufacturing companies can increase revenue is by increasing the number of products sold.
But capturing organic growth through new product development can be slow, costly, and full of risk. Companies easily spend years, and millions of dollars, on R&D, prototyping, customer research, and marketing. This is in the face of the pressing need for increased business agility and improved profitability to overcome market turbulence and continue to compete in the future.

In contrast, more and more manufacturing organizations are looking to gain a profit advantage through aftermarket services – the sale and delivery of maintenance, spare parts, and other value-added services. As new equipment orders are disrupted and capital spending comes into question, aftermarket products and services are an increasingly attractive option because they offer a comparatively short and straight path to new revenue streams. Indeed, according to Deloitte, margins for aftermarket services are often several times as high as for new products and can deliver over 50% of a manufacturer's profit.

Now is the time to consider how adopting an aftermarket services sales strategy can fuel revenue, leverage your relationship with your existing install base, and capitalize on escalating customer demand for bundled equipment and services.

Boosting Aftermarket Revenue

Aftermarket services represent a large opportunity that few manufacturing companies fully exploit, often because someone else has traditionally provided these ancillary services. But times have changed. The trend toward bundling aftermarket services and products is taking over the industry. Over half of manufacturers (66%) say that aftermarket service growth now plays a significant role as a revenue generator.

The financial rewards of aftermarket services are significant. Consider, for example, a large manufacturer of rotating equipment, such as turbines and engines—which have complex servicing, relatively high failure rates, and longstanding customer relationships. The lifetime revenue from aftermarket services on this type of equipment can easily exceed that from the original equipment sale. Are you willing to leave that money on the table?

Best Practices for Aftermarket Services

Companies that prioritize aftermarket sales can boost aftermarket services revenue by 30% to 60%. But while many manufacturers apply sophisticated targeting and marketing programs for customers for equipment sales they often do not apply a similar approach to aftermarket services. By using thoughtful and data-fueled analysis you can create strategic account plans that replace the gut-instinct approach that your sales staff may have used in the past. How do you do it? Here are two best practices to consider.

Capitalize on Your Existing Customer Portfolio and Install Base

Start by understanding your existing customer base and evaluating their likelihood to buy aftermarket services. For example, assessing the geographic locations of existing customers helped one manufacturer of industrial generators and power systems develop a meaningful view of customer needs based on the relative likelihood of storm-related power outages. These customers had a high propensity to buy aftermarket services and support. The analysis resulted in a 30% increase in service revenue with no increase in the manufacturer’s sales resources.

Segmenting potential aftermarket service customers should be easy given that you have far more information about your current install base—through existing account information—than you would for a typical sales lead. Now ask: How likely are these customers to buy something other than the product (such as parts, a maintenance plan, logistics support, or parts-management services)?

Empower Your Sales Force with Guided Selling

There is a common misperception is that manufacturers do not have the sales resources needed to devote to aftermarket services. But you don’t need to create a dedicated sales organization. Tools like XaitCPQ help existing sales teams sell aftermarket services regardless of your company’s organizational structure. It’s easy to quickly and correctly build and price combinations of products, equipment, and aftermarket services, and to do so at scale.

The next step is to actively guide representatives through the aftermarket sales process. XaitCPQ captures all your complex configure-price-quote information in one place and prompts teams during their interaction with customers with the specific information and specifications they need to quickly and accurately price combinations of interdependent products and services. As a result, sales team success soars. Companies have seen, on average, a 9% increase in revenue creation and a 26% increase in profitability.

It’s time to consider how a CPQ tool can help you gain a profit advantage with aftermarket services. You’ll have an expanded pool of buyers ready to buy, expanded revenue opportunity, and a broader and more profitable approach that enables your sales teams to sell more – and sell more profitably.

Related article: How Can CPQ Help You Bundle Equipment and Services?