In many manufacturing industries, the existing product install base could be ten times larger than the annual volume of new products sold. This large install base represents a profitable source of service revenues, but most companies only realize a portion of this potential revenue opportunity.
Some of the sources of revenue include:
- Extended Warranty or Service Programs
- Maintenance Agreements
- Service Parts
- Attachments or Accessories
- Remote monitoring using IoT
- Fleet or Asset management
- Value added services
- Software Subscriptions
- Data analytics to improve customer business
- Product Upgrades
- Trade-in to purchase new product
- Remanufacture and recycle at the end of life
While the type and nature of services vary by product and the industry, companies can apply many common strategies to grow revenues and profits from existing install base of products to maximize customer lifetime value.
Know who your customers are
To target the existing customer base, you, of course, need to know who those customers are, where they are, and their contact information such as email. When the products are sold through retail, and independent dealer networks, most manufacturers may not have good registration information. Capturing accurate registration information from channel partners and even end customers is the first step in connecting and engaging customers throughout the lifecycle.
Stay Connected using Customer Self-Service Portal
Invite customers to sign up for the customer portal from registration. Customer Portal is where customers can keep track of products they own and come back as the main resource for all post sale service interactions. Start with providing onboarding information with access to training, user manuals, and support. Customer Portal can generate additional revenues by simplifying how customers can buy service plans, parts & accessories, and services related to the products they own.
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Engage Customers with helpful Knowledge and Content
Helpful knowledge and content can keep customers coming back to the brand as a source of trusted information. Ability to easily search and access User Manuals, Videos, Knowledge Articles, and community generated content extends the brand experience and helps customers get more value out of their products. Timely tips about product usage, maintenance, service, and upgrades via email keep customers engaged with an opportunity to market and sell additional products and services.
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Sell Service Contracts in aftermarket
Service Contracts help establish a long-term relationship with customers and are a source of higher-margin revenues. With Attach rates well below the desired levels, companies have a huge opportunity to market and sell service contracts at various touch points including at the point of registration, before standard warranty expiration, and at the time of support. Timely email notifications to customers with an opportunity to buy service contract easily can increase attach rates and renewal rates.
Read more about Best practices to market and sell service contracts
Enhance Customer Support and Service experience
Customer retention is directly correlated to the experience customers receive when they need support and service. 68% of customers defect because of a bad experience and companies can improve loyalty and revenues from the loyal customer base by improving the support provided by the Customer Contact Centers, service delivered by the Field Service work force, and unifying various service processes across various department silos.
Read more on how to Optimize Field Service Management
Establish an online Parts and Accessories Store
Having an illustrated parts catalog helps customers to identify the parts they need and purchase directly online or from the local dealer or store. You can present the right parts catalog and relevant accessories that customers can buy based on the products they own.
Plan for Upgrade cycles with Trade-in incentives
Having a plan for the customers to trade-in and upgrade their products leads better customer retention and reduces the cost of customer acquisition. Providing incentives to upgrade the products prevents customers from switching to competitors by proactively replacing their products. Many companies have used this strategy in high-tech gadgets such as cell phones, but can be used for many durable products based on their lifecycle and usage patterns.
Value added and Innovative Services
The growth of digital products and services and Internet of Things (IoT) provide opportunities for companies to create value-added services including proactive or predictive maintenance, optimization of product performance, and Product as a Service with pay per use business models. Always connected products and digital services will transform how your customers will buy, use, and service their products.
Establish metrics around CLV
Customer Lifetime Value (CLV) is a good metric to capture the success with generating additional revenue from the install base. Customer Lifetime Value reflects the net profit attributed to the entire future relationship with a customer. Aftermarket revenues as a percentage of total revenues and comparing to your industry peers and best-in-class companies will provide you a measure how much money you are leaving the table. Metrics such as Registration Rates, Attach Rates, Renewal Rates, and Upgrades should be tracked to measure the value you can realize from your install base.
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Winning in the Aftermarket
Marketing, Sales, and Service teams need to develop and execute strategies to realize the full potential of the revenues from the existing install base. Some analysts have estimated the maintenance and service industry to be $250 Billion to $1 Trillion. So, there is plenty of room for you to grow, but companies need to focus on winning in the aftermarket to improve the loyalty, profit margin, and growth in today’s hyper competitive markets.
The current marketing and CRM systems focus on customer acquisition, and companies need a Connected Customer Experience management platform and solutions to Maximize the customer lifetime value