Tag Aftermarket

Tag Aftermarket

Digitize to Win: 3 Strategies for Manufacturers

June 9, 2017 Tags: , , , , , , , , , ,
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Technology is changing the world, and it’s also changing manufacturing

Incorporating digital best practices, such as working from relational databases, providing real-time information to employees and customers and improving the customer experience through online sales is what will separate the manufacturing winners from the losers over the next decade.

What’s Changed in Manufacturing

The internet has changed how customers interact with companies. We now live in a digital economy, where the ability to purchase almost anything is at the tip of your fingers with one click of a button.

Online shopping used to be thought of as only something that companies selling direcctly to consumers needed to factor in. However, the digital economy has so deeply permeated our behaviors that this isn’t limited just to B2C customers anymore. Things are starting to change for B2B commerce too, and companies that are smart enough to get on board will be the ones to reap the most successes.

Here are a couple of statistics to back up this change in purchasing preferences. A recent study showed that:man looks up parts information on computer

  • 93% of B2B customers prefer to buy online when they’ve decided what to buy.
  • 74% feel buying from a website is more convenient than buying from a sales representative.
  • 56% expect to make half or more of their work purchases online this year.

This shows just how critical incorporating digitization into B2B and manufacturing is. B2B buyers want to be able to purchase products and get the information they need anytime, anywhere. They want their experience to be effortless and easy. And companies that don’t do this are going to facing a much shorter life expectancy.

Optimizing Operations

How much time do your employees spend searching for information, making changes or fixing errors from inaccurate information?

Outside of some of the biggest companies, manufacturing today remains largely a “pencil and paper industry”. This type of mentality has a huge impact on how productive your business can be. It leads to departments working in silos, not sharing changes and updates and tribal knowledge that could be useful for everyone staying isolated.

This is obviously very inefficient. You have departments all over, working on different documents and outdated information, which can lead to the loss of time, and, as people leave, the loss of tribal knowledge.

Take care of this disconnect and optimize your internal operations. Start tablet looking at a shipping facilityby getting everyone using the same database to store their documents, manuals and notes. Using this type of relational database in the cloud (meaning it can be accessed from anywhere) allows everyone to be connected and working from the same information.

This not only will have an impact for your engineers, but will also allow your field techs and customer service reps to access up-to-date parts information.

Think of all of the time your people will save by having instant access to real-time information and breaking down communication silos. This alone can save hundreds of thousands of dollars for your company.

End users are more empowered than ever.

When making purchases, they want something that is high quality, low cost, delivered quickly and information they can get instantly.

Manufacturers in the past have relied on dealer networks or conducting business over the phone. While there will still be businesses where this works, more and more customers want to be able to get their information and ordering done online.

A recent study found that customers that have to speak to a sales rep to make a purchase are 4x as likely to go somewhere else the next time they need to buy something. We need get in a mindset of being customer-focused. If you can do that, you can gain loyalty, which will help sustain your business and sell more aftermarket parts.

One major source of revenue many manufacturers are missing out on is providing easy access to selling aftermarket parts.

an assortment of spare parts on a gray backgroundStudies have shown that about $1 trillion dollars a year are spent on parts for machinery people already own. What may surprise you is that OEMs capture less than 50% of this market currently. It’s will-fitters and other dealers that are taking advantage of this high profit margin segment, which is too bad.

There is no one in a better position to sell your parts than you.  You have a distinct advantage when it comes to enhancing the buyer experience. You have access to exclusive customer data, comprehensive product knowledge and more precise parts information.

Parts sales is a market that is sitting there for the taking and can provide a long-term steady stream of revenue after an initial sale of equipment. While there will always be some people who only want a bargain, shoppers have proven that they will pay for convenience and quality, which OEMs can provide.

In Summary
The companies that are going to thrive and overtake their competition are the ones that recognize the opportunities available and incorporate technology into their operations and sales. By creating a strategy early, you will be able get a jump on the market and leave everyone else in the dust.

Read about these strategies in action in our customer success stories. 

Manufacturers: Your Web Experience IS Your Brand

May 23, 2017 Tags: , , , , , ,
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A leading customer experience consultant from the UK, Gerry McGovern, recently published an article titled, Your Digital Interface Is Your Brand. While Mr. McGovern typically focuses on more service-oriented institutions and businesses, the message is a definite reality for manufacturers.

Think about how the average customer interacts with a manufacturing company. Whether that customer is a dealer, a machine owner, a technician who is working to repair equipment…it’s very likely that whatever that person’s role, their first contact when seeking help or information will be in the form of a website visit.

Ten years ago, this certainly wasn’t the case, especially for manufacturers of heavy and industrial equipment. Their sales models generally involve a dealer network, and customers were trained to contact the dealer first with any needs, problems or support questions.

In this scenario, the dealer becomes the literal face of the manufacturer. And in the past, the dealer was the closest and most effective representative of the factory and the products it made.

Nowadays, rather than the local dealer being viewed as the closest extension of the manufacturer’s brand, customers see an OEM’s website as shouldering a larger share of the responsibility for brand loyalty.

As McGovern puts it, “Our impressions and experiences of brands today are increasingly digital.”

Online technical support boosts service efficiency and spare part salesHe goes on, “When I think about my bank today I don’t think about its physical buildings or its people. I think about the hassle I constantly have with Java every time I visit its site, how the navigation is not simple enough, and how if I have to ring support I can be waiting 10-15 minutes for someone to answer….”

Is this how your industrial buyers, dealers and equipment owners think about your website? Do you make it easy for current and future customers to access your site? Can they easily find what they need? What percentage of visitors can achieve their goals without picking up the phone? Are you putting an internal business unit’s needs ahead of the customers’?

If you can’t positively answer these questions, you haven’t given your online presence enough credit for the massive influence it has on branding, customer engagement and the future of your business.

Hiperbaric reduces pressure on aftermarket sales and services using Documoto

March 21, 2017 Tags: , , , ,
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Hiperbaric makes high-pressure food processing machines that sterilize and preserve food products in factories around the world. As a company at the forefront of innovation, they were looking for a way to provide better technical support for customers.

Check out the infographic below to see how Hiperbaric has improved aftermarket sales, field service productivity and user experience using Documoto.

reducing pressure on after-sales support 
Download the full case study here.

10 Myths About Winning in the Aftermarket

February 23, 2017 Tags: , ,
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Aftermarket sales are an afterthought for many manufacturers, which is part of the reason that independent third-party suppliers have captured most of the market.

Many companies are content letting these independent suppliers take care of their customer’s needs. There are a lot of common concerns about what it will entail to have a successful part sales strategy, which hinders manufacturers and keeps them from tapping into this high-margin business segment. Not only can these parts sales help boost a company’s overall financial health, but they can even generate more profit and revenue than original equipment sales.

To stay competitive, it’s time to change how we think about the aftermarket. Here are 10 myths about aftermarket parts sales and the reasons you should rethink those misconceptions:

10 Myths About Winning the Aftermarket Part 1 Infographic 10 Myths About Winning the Aftermarket Part 2

The Top 3 Business Trends for Manufacturers in 2017

December 16, 2016 Tags: , , , , , , , , , ,
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The new year is fast approaching, which means it’s the perfect time to look ahead and start gearing up for 2017. We’re predicting that next year will continue to bring fundamental shifts to manufacturing business operations, thanks to technology.

Here are the top three business trends manufacturers should address to improve profits, drive customer retention and stay ahead of the competition in 2017.

1. The relative value of the aftermarket

Manufacturers of industrial-grade equipment have a continual revenue stream problem—it can be years or even decades before customers need to replace a full piece of machinery, and profit margins are tight on these capital equipment sales. On the other hand, selling aftermarket parts is a high-margin, long-term revenue stream.

drill machine parts

Economic studies show that spare parts and aftermarket sales comprise almost 8% of the GDP, meaning about $1 trillion is spent a year on assets that are already owned. Big money is made through ongoing sales of replacement parts and service products. Who is best positioned to sell these products, if not the OEM?

What may surprise you is that OEMs traditionally capture less than 50% of aftermarket part sales. Instead, most of this market share is captured by third party resellers, will-fitters and other suppliers.

This is a huge missed opportunity. By taking steps to increase these aftermarket sales using technology and other resources, companies can see their profits grow exponentially this upcoming year.

2. It’s time to move more sales online

The internet’s broad use by consumers and businesses has dramatically changed how people gather information and make purchases. And the expectation of equipment owners to be able to research and buy parts online is only going to continue to grow in the future.
an with credit card online shopping

Manufacturers have a unique opportunity over the next few years to streamline aftermarket sales with online parts catalogs and flexible purchasing options.

Brand loyalty may be dying in the consumer retail arena, but OEMs have a distinct advantage when it comes to enhancing the buyer experience. With access to exclusive customer data, comprehensive product knowledge, and more precise parts information, manufacturers have a head start on making a “sticky” online sales platform.

While bargain hunters will always exist, modern shoppers have proven that they will pay for convenience and quality, elements that OEMs are uniquely poised to provide.

Providing online parts sales and information is one of the quickest paths to increase revenue and customer satisfaction. The digital shift means that buyers expect real time information with immediate access. Soon (and by “soon” we mean now), a bulky paper catalog accompanied by a parts desk phone number isn’t going to cut it.

3. Internet of Things (IoT)

IoT drawing

Where do people, data and intelligent machines intersect and how is it going to change the world? According to IDC, IoT spending is expected to skyrocket in the next few years, from $656 billion in 2014, to $1.7 trillion in 2020.

And there’s a good reason for it. IoT can make services more responsive, convenient and efficient for consumers. This is true for industrial IoT (IIoT) as well. Most new heavy equipment includes telematics capabilities, with sensors installed on key systems, whether operators choose to use them or not.

Some companies are using these systems to shift asset maintenance from a preventative to predictive model. Downtime is one of the costliest variables in equipment lifecycle costs, and IoT can play a key role in diminishing it.

Instead of guessing the condition of equipment and replacing parts on a predetermined schedule, maintenance can instead be triggered by real-time conditions monitored by sensors installed in the machine. This may seem like a small change, but significant dollars can be saved by not replacing parts that don’t need it, and by optimizing downtime and reducing unplanned work stoppages.

For manufacturers, think of the benefits gained from this type of data, and how customers can be encouraged to buy aftermarket parts from an OEM. With IoT and accurate data, you can predict a customer’s needs and have parts and supplies ready and in stock. And by integrating this data into your online parts catalog, you could send the customer a reminder email with a suggested shopping cart that includes the needed parts.

This is an exciting time to be in the manufacturing business and use technology to increase customer satisfaction and revenue. By integrating streamlined aftermarket parts sales, data and online capabilities into your overall strategy, your business can jump to the next level in 2017.

The Future of Service Depends on Digital

October 3, 2016 Tags: , , , , ,
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Digabit’s CEO, Alan Sage, recently shared with the company a market research report from Cisco, The Digital Manufacturer: Resolving the Service Dilemma. The central theme of the report is that manufacturers have traditionally been focused on products as their core business, but that to maintain or achieve growth these firms must transition to place more emphasis on service-based revenues.

Why is that? As product design and engineering have become more sophisticated, reverse engineering to replicate products has evolved as well. That means manufactured products are becoming less differentiated, and more commoditized. Why purchase a Caterpillar loader if you can buy another machine with similar specs, and many of the same sub-components, for 20% lower cost? In the past, brand reputation may have provided an answer to that question, but today’s B2B consumer is increasingly brand-agnostic.

Today, the answer to what machine to buy may depend more on the strength of a manufacturer’s after-sale service and support. Caterpillar offers a wide spectrum of service plans and products to keep customers’ assets in top operating condition. So, they can potentially pitch a lower total cost of ownership (TCO) over the 10-20 years of service life of a typical heavy machine. We have seen at least one heavy equipment manufacturer shift their emphasis from selling machines to “selling” uptime.

It’s all well and good to point to improved services as the path to greater profits, but in reality the expansion of service offerings generally leads to increased complexity and costs. According to Cisco, the solution to this dilemma is to digitally transform the organization, from R&D to supply chain to CRM.

Interestingly, when manufacturers were asked which digital technologies would have the most impact on production over the next three years, the top three picks were cloud technologies, IoT/M2M, and data analytics. The interesting part is that robotics and 3D printing did not make the cut, and that companies are most focused on optimizing data analysis and connectivity.

How does Digabit’s Documoto platform fit into the digitization of manufacturing and service delivery? Machines are constructed from parts and assemblies. These components start their lives as digital data in a CAD design application, but once they go into production much of the associated product metadata is stripped away. Documoto retains the relevant digital part information and stores it in a structured database format.

So, if a forward-looking manufacturer wanted to connect a specific set of parts to a new predictive maintenance application involving machine-to-machine communication, they could develop an integration with the data in Documoto to identify the part, check inventories, and even order the needed items after analysis. One of Digabit’s existing customers has already built a diagnostic tool with similar functionality.

Go check out Cisco’s report, and then think about how digitizing parts data might fit into your long-term digital strategy.

Podcast: The eCommerce Opportunity

July 22, 2016 Tags: , , , , , , , , , ,
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In March of 2016 Alan Sage was the featured guest on top marketing consultant Bruce McDuffee’s weekly podcast show, Manufacturing Marketing Matters.

As always, Bruce asks insightful questions and provides his own expert perspective. And Alan shares his predictions on the future of online and aftermarket sales for manufacturers who traditionally relied on dealer/distributor networks to generate orders and revenues from part sales and service.

Alan and Bruce discuss the increasing difficulty for manufacturers to maintain or increase revenues in light of global economic volatility, the proliferation of 3rd party suppliers, and greater competition from non-domestic manufacturers. The competition for aftermarket part sales has become even more challenging, with resellers on eBay, Ali Baba and other online channels vying for the same market share.

The solution is to create an effortless buying experience for online users, akin to the Amazon.com experience that private consumers have come to expect. That is, the ability to buy anywhere, any time, and have confidence that you’ll receive the right parts in a cash-register-ecommercetimely fashion.

Listen to the entire show and learn more about Alan’s actionable takeaways:

  • Manufacturers’ proprietary information (this includes parts catalogs) gives them a competitive advantage over non-OEM aftermarket providers, so figure out how to leverage this information.
  • Customers will pay more for convenience and reliability, so don’t make the mistake of trying to compete only on price when you can truly add value to a transaction.

Bruce McDuffee has proven to be an innovative voice in the world of marketing for manufacturers, applying concepts from B2C and other arenas to the unique challenges and needs of manufacturers. From content marketing to eCommerce to search engine optimization, Bruce stays on top of the latest.

If you’re a manufacturer wondering about the trend toward more transparent online B2B sales, or a marketer looking for advice on best practices for manufacturers, you’ll get something of value from this exchange of ideas.

Check out the podcast on manufacturing eCommerce today.

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.

If you’d like more insights on parts sales strategy, dealer relationships and recent manufacturing technologies, be sure to subscribe to our mailing list.

 Watch the Documoto overview video

Reclaiming the Aftermarket: How OEMs Can Provide Complete Service Solutions

April 8, 2015 Tags: , ,
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In recent years a higher focus has been placed on maximizing sources of revenue by eliminating gaps in service solutions. In addition to honing in on specific products or strategies, original equipment manufacturers (OEMs) are working to recapture lost profits through what’s known as “reverse logistics.”

Transportation agency Ryder noted instead of the traditional supply chain flow of products from factories to consumers, reverse logistics operates as a means to repurpose older or used parts and place them back into the market for purchase. This approach allows OEMs to profit from the original sale of the part, and then once more on the resale. The strategy, however, only works if companies have a strong presence in the aftermarket.

One of the largest challenges facing OEMs is that of dealers working exclusively in the aftermarket. By selling refurbished parts, these companies are viewed as customer service solutions, providing the parts consumers need at a discounted price. As a result, OEMs must adjust their own business models to compete against these aftermarket providers.

OEMs can reposition themselves to garner a larger share of the aftermarket by fine-tuning their operations and taking advantage of their unique strengths, such as wider margins and a penchant for innovation.

“OEMs can streamline processing and parts-finding by implementing electronic parts catalogs.”

Create a one-stop shop

The Harvard Business Review reported more than $1 trillion is spent every year on assets that are already owned. This means consumers are recycling their own money back into the marketplace to repair or replace necessary parts, whether for automotive, construction or other purposes. With this in mind, why not redesign OEMs into one-stop shops for consumers and businesses?

According to ModusLink Global Solutions, a supply chain management service, the value of any product extends beyond the date of its first purchase.

“The life of a product and part does not have to end when failure occurs,” the company stated. “In this current economy, parts and products are being stretched further and further to maximize use, and thus repair becomes essential to keep these assets productive. Organizations are finding that if managed correctly, the repair and returns operations can become a very profitable side of the business.”

OEMs are now promoting their own aftermarket services more so than in the past, creating entirely new divisions of their companies to deal with the management of after sales. However to progress further, OEMs can streamline processing and parts-finding by implementing electronic parts catalogs, enabling faster customer service to become a more efficient competitor against other parts dealers.

Free up capital

In the case of OEMs, the ultimate bottom line in quarterly budgets hinges upon the sale of newly manufactured parts. But once these parts are sold, there is little return on the initial cost to produce the part other than the profit gained from the sale. Beyond that, revenues must come from additional sales. This strategy can work during booming economic times, but if a particular OEM is not on the cutting edge of the latest innovations or is faced with weak demand, the entire business model falters.

By focusing on refurbished parts in the aftermarket, OEMs can see higher returns throughout the entire lifespan of parts, Professional Auto News reported. This additional revenue stream makes each asset less capital-intensive, freeing up cash flow and providing OEMs with more financial resources to enter new markets.

Manage pricing

The Boston Consulting Group indicated value-based pricing of refurbished parts can increase per-unit margins by up to 10 percent. Many times, parts dealers and OEMs both rely on outdated methodologies to price remanufactured parts. This causes prices to be out of touch with customer demand, for which after sales providers routinely undercut OEM prices to complete transactions. In essence, parts need to be priced accurately and competitively to generate consumer activity, which OEMs adopting electronic parts catalogs can capitalize on more so than smaller competitors.

Additionally, bundling spare parts into unique packages can increase total sales and optimize profitability by reducing overstocked inventories.

Expand technical support

Data insights provider EDA noted fast-tracked parts ordering could be the key to allowing OEMs to beat out weaker, slower competitors. To accomplish this, electronic parts catalogs should be implemented and used across the entire spectrum of services, both during point-of-sale and in the aftermarket. This technology makes every transaction more efficient and allows more time to be spent on expanding customer bases. Over time, continued superior service will help turn infrequent customers into reliable buyers.

Solidify infrastructure

Infrastructure plays a critical role in the overall ability of OEMs to alter current business strategies without damaging existing revenue streams. According to the Warehousing Education and Research Council, OEMs have stronger ties to customers, more efficient distribution channels and greater technical and engineering resources. As such, they also have enhanced quality assurance of each product.

These factors represent the foundation of OEM service as well as being an avenue for more specialized solutions. OEMs simply need to optimize the effectiveness of each of these respective aspects. By digitizing manual processes and working more closely with end users, productivity can increase, providing OEMs with the competitive edge they need to expand their presence in the aftermarket.

 Watch the Documoto overview video

Myths Distilled About Winning in the Aftermarket (Part One)

April 3, 2015 Tags: , ,
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Although OEMs have been working in recent years to regain market share in the parts sales business, independent third-party suppliers still rule the aftermarket domain.

Part of the reason is that customers believe aftermarket parts are cheaper than OEM parts and of the same quality. This perception extends to service providers as well – customers rarely return to dealers for non-warranty service because they view independent service providers as less expensive and less likely to offer unneeded repairs.

Even though these generalizations aren’t always true, they’re widespread enough to hinder OEMs from gaining a significant foothold in the lucrative parts and service business. Manufacturers should endeavor to change these customer-held beliefs over time, but in the meantime, it’s much faster and easier to dispel the fallacies your own employees and internal departments have about the aftermarket.

Let’s take a look at the common misconceptions about success with parts sales:

Myth #1: You should keep your best people on the primary product

The basis of this myth lies at the heart of the OEM identity. After all, you manufacture original equipment, and that’s what you do best. But when you keep all your top people on the primary product, your aftermarket business stands no chance against third-party suppliers for whom the aftermarket is their primary product. OEMs need a business model that focuses on parts sales. The market segment is too competitive for a part-time focus to be successful.

Myth #2: Your customers will automatically choose your OEM parts

Last month, we talked about how you have to give a compelling reason for customers to choose OEM parts over the competition. The key ingredient is lock-in. Aftermarket sales growth depends on customers being locked-in to buy your product or service. Extended warranties, long-term service contracts, patented parts you can’t find elsewhere, specialty service expertise – these are all examples of effective lock-in strategies.

Myth #3: Branding, advertising and social media are irrelevant for parts sales

Most OEMs do a remarkable job of marketing their original equipment, but they stop short when it comes to publicizing their after-sales services. Unless your customers are locked-in for life, your brand’s parts and services need to stay at the forefront of their minds. Manufacturers and dealers need to work together to generate buzz through press coverage, consumer events, and in-store promotions.

Myth #4: You have to lower prices to be competitive

Since most customers believe aftermarket parts are cheaper, slashing your prices may seem like a logical solution. Unfortunately, this accomplishes three things: 1) it lowers the profit margins on parts and services sold to locked-in customers and the small percentage of people who buy OEM parts regardless of price; 2) it incites competitors to lower their prices, thus starting a price war; 3) it sets you up to sacrifice quality for the sake of price. Instead, OEMs should focus on improving the overall customer experience and making their after-sales services more convenient for the customer.

Myth #5: Fill rate is the best yardstick of aftermarket performance

OEMs often measure their success and efficiency in the aftermarket by the percentage of orders satisfied from stock at hand, or the fill rate. But, as Harvard Business Review pointed out, “the level of demand that can be fulfilled through parts at the manufacturer’s warehouse has no meaning to the customer if her product hasn’t been repaired.” To truly increase customer satisfaction, manufacturers need to base their aftermarket business on customer-focused metrics like machine uptime rather than internally-focused metrics like the part fill rate.

Check out part two of our post for the next five myths about aftermarket success.

 Watch the video to learn a faster way to create parts catalogs

The Secret to Helping Customers with After Sales Service

March 13, 2015 Tags: , , ,
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In an effort to increase customer satisfaction, differentiate from the competition, and achieve higher margins, the vast majority of OEMs have integrated some level of after sales service into their business model. For the most part, these forays into the service business go no further than spare parts supply for faster dealer repairs.

While spare parts management is critical, it has become a new baseline level of service, and customers are calling for more preventive measures, like the incorporation of smart technology, product-as-a-service models, consulting services, and customized warranties.

In recent years, market research firms have been strongly advising manufacturers to shift their attention towards these predictive after-sales service offerings, and early reports are overwhelmingly optimistic about the potential for this approach to revolutionize manufacturing.

Some leading manufacturers are already generating half of their revenue from the service business, thanks to the disproportionately high profit margins of services compared to new-product business.

However, what these reports and predictions leave out of the dialogue is how manufacturers can position these service offerings to truly help customers and enhance loyalty.

Selling The Outcome

The secret to successfully implementing an after-sales service strategy lies in transitioning from selling physical products to selling outcomes delivered by products.

Legendary Harvard Business School professor Ted Levitt famously quipped, “People don’t want quarter-inch drills – they want quarter-inch holes.” In other words, when customers are faced with a problem, they search for something that will solve that problem better than other alternatives.

Your customers didn’t pay you for a top-of-the-line riding lawn mower, they paid you for a beautiful, freshly mowed lawn that didn’t involve the discomfort of pushing a piece of equipment around the yard for 60+ minutes in ninety degree weather.

Maximizing Uptime

When equipment is down, it’s not solving the problem. Customers can’t make quarter-inch holes or maintain a manicured lawn. The product isn’t delivering on its promised outcome, so customers don’t feel like they’re receiving tangible value.

Downtime gives the customer two choices: get the equipment back up and running – and fast – or search for something else to solve the problem. This is why the most effective after sales services initiatives are geared toward, not just repairing equipment, but preventing the need for repairs in the first place.

If manufacturers want to keep customers happy, encourage brand loyalty, and drive repeat business, they need to maximize equipment uptime through predictive service efforts. It’s the only way the product will continue delivering its promised outcome.

Preventive Measures

Preventive maintenance is the new frontier for after sales strategy. More than 70% of manufacturers are evaluating, planning or implementing smart technologies for maintenance and optimization of their assets and their customers’ assets, according to a recent IDC report.

The application of smart technologies like sensors and data acquisition systems promise greater efficiency, cost reductions, and customer retention. In terms of preventive-focused after sales services, smart technology could prove especially useful as an early warning system, predicting when service events need to take place and enabling more responsive networks of service parts.

The movement towards product-as-a-service approaches is also gaining speed. Manufacturers share in the risk of the equipment’s operation by, essentially, renting out the equipment and assuring uptime to the customer.

As Heather Ashton, Research Manager of Service Innovation and Connected Products at IDC Manufacturing Insights, described, “In the coming years, manufacturers will continue to provide both competitive differentiation and higher margins by bundling or providing added services with products, including product-as-a-service business models where customers pay for product operational uptime and performance, over time.”

While the advent of smart technology and product-as-a-service in manufacturing is exciting, these trends won’t increase profits unless they are successfully translated into services that keep equipment up and running throughout the product lifecycle. To take a page from Ted Levitt, “people don’t want smart technology ­– they want continual uptime.”

 Watch the Documoto overview video

How Equipment Manufacturers Can Create a Successful Parts Sales Strategy

March 5, 2015 Tags: , , , ,
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While the aftermarket used to be an afterthought, leading OEMs have started to recognize the effect of parts sales on their overall financial health.

Not only are these sales less cyclical, but also they also frequently generate more profit and revenue than original equipment sales. According to Industry Week, sales from spare parts comprise 40% to 60% of total manufacturer revenues.

This is no surprise, considering American businesses and consumers spend approximately $1 trillion every year on assets they already own.

But the challenge – and it’s a formidable one – lies in devising and adapting a spare parts sales plan to ensure your dealers and customers buy OEM parts to help maximize profit margins.

Let’s go through a few of the ways you can drive growth, encourage customer retention and create a competitive advantage with your aftermarket strategy.

It’s All About Loyalty

As we’ve mentioned before, success in the aftermarket depends primarily on catering to your established base of customers. Delivering impeccable customer service and emphasizing the values you share with your customers are surefire methods to build customer loyalty.

Maintaining your customer base also depends on the durability of your original equipment. Every equipment replacement is an opportunity to lose your customers to a competitor.

On the other side of the coin, however, Sheila Brennan, program manager for Smart Service and Aftermarket Strategies at IDC Manufacturing Insights, cautions that “OEM executives must keep in mind that increased reliability of equipment is a double-edged sword when it comes to customer intimacy. Fewer service events mean fewer opportunities to create brand loyalty and form a customer relationship.”

For your aftermarket strategy to work, you have to find the middle ground between unreliable and over-durable. Providing extended service warranties and discounted equipment upgrades can help reduce the likelihood that customers will switch to competitors.

Lock In Your Customers

Third-party aftermarket parts suppliers will almost always win when it comes to price, so OEMs have to give customers a compelling reason to go with their parts. While this can come in the form of greater quality assurance or a better service experience, the most foolproof way to ensure customers will choose your part over the competitor’s is to give them no other option.

Patented part designs, service expertise, convenient replacement kits or warranties are all proactive offerings that lock customers into your aftermarket. You are supplying something they simply can’t get anywhere else.

Predictive analytics company Forio offers the basic example of a patented three-prong stapler and staples. While the original product – the stapler – itself may not have a huge market, in order to derive any value from it, every customer will also need to buy a few boxes of three-prong staples on a repeat basis. Over time, sales of staples will far surpass sales of staplers.

The Importance of Technology

To manage and grow aftermarket parts sales effectively, manufacturing executives have to put the proper tools in place.

Warren Smith, global industry director at Infor, suggests that you utilize fast, agile technology that is specialized for the equipment industry. “It will need to span the entire lifecycle of the equipment, from manufacture to aftermarket service, in one integrated solution.”

Incorporating manufacturing-specific products like Documoto into your aftermarket mix empowers dealers and customers to make real-time decisions based on accurate information and order the spare parts they need in a fast, convenient and electronic way. This enhances expert technical support and delivers unprecedented value to your customers, boosting spare part sales and driving repeat business.

Learn more about using Documoto as an integral solution for aftermarket parts sales.

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4 Tips to Help Dealers Get Their Aftermarket Parts Faster

February 16, 2015 Tags: , , , ,
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While most customers don’t expect their original equipment to last decades without routine maintenance and repairs, they do expect manufacturers to quickly fix products when they break down.

Unfortunately, achieving faster turnaround times on parts orders is easier said than done. Harvard Business Review reported that roughly 50% of consumers faced unnecessary delays in repairs because dealers didn’t have the right parts to fix them.

To support dealers in minimizing equipment downtime, it’s imperative that OEMs find a way to shorten the period between order and delivery. Here are a few tips to help you meet the demand for quick turnaround:

Standardize Order Processing Procedures

To curtail the order-to-cash cycle, Aberdeen Group’s recent research report suggests creating standard procedures for quotation, order management, order fulfillment and delivery, and then integrating these into a single portal from which all parts orders are handled.

According to the report, companies that have standardized their order management processes boast 30% lower invoice volumes requiring manual intervention than those that haven’t.

By integrating your ERP system with your parts lookup and order entry software, you can ensure every order received is in an appropriate, easy-to-follow format and seamless move between programs, eliminating much of the manual effort.

Activate Your Dealers

Give your dealers the means and information to act quickly, accurately and decisively on their own so they can respond instantaneously to customer needs.

Not only is self-service cheaper, most people actually prefer it. According to a study by Nuance Enterprise, 67% of respondents said they preferred self-service over speaking to a company representative.

Making parts books and online ordering are available 24/7 is like short-circuiting the order process. Dealers can find pricing and part availability and place an order in a matter of seconds. This bypasses long, back-and-forth exchanges with customer service and shrinks the time between knowing a repair needs to happen and placing the order.

Manufacture Near Your Market

Many larger manufacturers have elected to open additional manufacturing sites near dealers to expedite turnaround time. The philosophy essentially boils down to, “build the majority of what you sell, in the market where you sell it.”

While it requires a substantial capital investment, moving closer to local markets can save drastically on both shipping expenses and delivery time. Additionally, if a major disaster (like a flood or earthquake) slows production at one facility, the other site can keep the ball rolling to ensure dealers receive their parts in a timely manner.

A similar strategy we’ve also been seeing lately is manufacturing near suppliers. When slow order fulfillment is due to the availability of raw materials or goods, it might be time to consider switching suppliers or moving closer to your existing ones.

Manage Expectations

The advent of eCommerce has made customers accustomed to shorter and shorter timeframes between order and delivery. To allay dissatisfaction in cases where a fast turnaround just isn’t possible, manufacturers must set realistic expectations for order delivery.

Tell dealers exactly when they will receive their goods as they’re placing the order. By establishing a more generous time frame upfront, you reset the preconception of immediacy.

What strategies has your company implemented to improve turnaround times? Let us know in the comments.

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5 Ways Equipment Manufacturers Are Building Customer Loyalty

October 6, 2014 Tags: , , , ,
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At Digabit, we spend a lot of time talking to our customers, and I’ve found that one of the main reasons manufacturers love Documoto is that it creates a rich aftermarket experience for their customers and their dealers.

Manufacturers use our solution to enhance coordination between their warehouses and dealers, update and distribute accurate parts information in a timely manner, and, above all, give their customers an easy way to identify and order the right part. READ MORE