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Myths Distilled About Winning in the Aftermarket (Part Two)

April 30, 2015 Tags: , ,
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It’s no secret that equipment manufacturers struggle to compete with third-party suppliers in the aftermarket. Today, we’re finishing up our look at ten common misconceptions that hold OEMs back from parts sales success.

If you missed the first five myths where we talked about pricing, employees, fill rates and more, catch up here.

Myth #6: You can apply the same software, tools and resources used for original equipment production to the aftermarket

Most manufacturers blindly apply ERP thinking to tackle the complexity of part and service networks, but these processes and tools don’t account for the erratic nature of the spare parts business. Managing thousands of SKUs, distributing parts information to dealers and customers, drawing up forecasts to mitigate risk, and responding to parts orders with rapid speed all require software specific to aftermarket service and support. Otherwise, you’ll be facing mismatches between supply and demand, which in turn affects customer service and profit potential.

Myth #7: Parts demand is impossible to predict

Maintaining an efficient inventory of spare parts is one of the biggest challenges of the aftermarket. Unlike original equipment, after-sales services can’t be produced in advance of demand. You’ll never know exactly which parts you’ll need until a breakdown or maintenance issue occurs. But new technology like predictive analytics makes it a lot easier to predict service events. By using demand histories that look at the frequency of specific repair types in the past, manufacturers can generate more accurate probability-based forecasts of parts requirements.

Myth #8: Most of your parts sales will happen over the phone or in-person

While brick-and-mortar parts sales are up 1.5%, online sales are projected to grow 14% for the next several years, according to research by Hedges & Company. Additionally, over two-thirds of consumers in the US use the internet for price comparison and location searches before buying spare parts. This research indicates that the aftermarket focus is shifting from in-person and over the phone assistance to online support. Many of our customers have certainly experienced this shift. Takeuchi, for instance, receives 98% of their parts sales electronically thanks to Documoto’s E-Commerce features. Check out this infographic featuring the stories of Takeuchi and other manufacturers.

Myth #9: New technology like IoT and telematics won’t affect the aftermarket

We’ve talked a lot about how new technologies are driving growth for manufacturers, but it can be hard to see how parts sales benefit from these improvements. The truth is that IoT does more than just increase demand for original equipment, it creates a customer-manufacturer communication channel that can drastically impact the aftermarket. By incorporating sensors and telematics systems into products, OEMs can automatically notify customers when they’re due for service or in need of repairs while, at the same time, recommending nearby dealers and service packages. These convenience features give OEMs an obvious advantage over other aftermarket suppliers.

Myth #10: The complexity of aftersales rules out customization

The vast majority of OEMs and dealers think that maintenance and repair issues are too diverse and varied to tailor aftermarket services to individual customers. This limiting belief might be keeping you from another possibility – customizing your aftersales approach for specific customer types. Segmenting your installed base into five or six broader groups allows you to assess key differences like values and service behaviors and react accordingly. While one group might want top services and VIP treatment, another group might want thorough explanations for the service and price. By knowing what your original equipment customers expect and desire from aftersales service, you can develop new service products and frame existing packages to give these different customer groups a more tailored experience… and increase loyalty and retention rates as a result.

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