Servitization is one of the most critical disruptive forces facing the manufacturing industry. What exactly is Servitization? It is the transformational journey that a manufacturer undergoes to develop services and solutions to supplement their traditional product offerings. Ultimately, for equipment manufacturers, it’s about generating additional and profitable revenue streams from the provision of services.
If you or members of your leadership team are tasked with the responsibility of Servitization, you are not alone. A recent study by Field Service Insights found that service revenue growth is top of mind for approximately two-thirds of the 200 business leaders from Capital Equipment Manufacturers surveyed. Just like these business leaders, if you are struggling to find new sources of profitable revenue than look no further than your existing install base. It represents a veritable treasure chest of profitable revenue.
How is this possible?
Over the life cycle of the installed base, customers may spend as much as 10, 20 or even 30 times more money on service and support of the product then the amount they originally paid to purchase the product itself. Every year that a customer owns your equipment they are likely to spend money on services like emergency break fix services, installation services, scheduled preventative maintenance, spare parts, calibration services, technical support, moves/adds/changes, benchmarking, retooling, and professional services (e.g., feasibility studies, productivity & efficiency improvements, etc.). Over a 10 to 20-year lifecycle, these expenditures can add up and this could represent millions of dollars of revenue for your company.
If you are going to unlock the value of the installed based, then you need to follow a couple of winning strategies. First, don’t lose sight of the mission of Servitization. As business coach Tom Schlick points out in his book titled Jump Start Your Service Revolution: Transform Your Company’s DNA and Thrive in Age of Disruption, companies like BlackBerry and Kodak lost their way and encountered financial troubles because they lost sight of the opportunity available to them by expanding their offering to include services and solutions. Second, as Schlick points out, the best way to mine revenue opportunities from the install base is through customer loyalty. This requires manufacturers to nurture and maintain a customer-centered, service-centric culture and really listen to first line service personnel who have a greatest amount of insight on customer wants and needs.
According to Michael Blumberg, CMO of M-ize, Inc., a third winning strategy requires that your company implement systems and processes that help market, sell, and manage services. The ideal solution results in improved performance by following best practices. For example, higher service contract attachment rates through having the ability to configure, tailor, and market service offerings. Another possible outcome is improved contract renewal rates through periodic billing and frequent notification to customers of service events and renewal dates.
If you’d like to learn more, join us for a Webinar with Tom Schlick and Michael Blumberg where they will discuss strategies to win in the aftermarket and maximize the lifetime value of customers.
Webinar Topic: Winning service strategies to unlock the value of the install base
Date & Time: Feb 26th, 2019 at 1 PM EST/12 PM CST
Presenters: Michael R. Blumberg, CMO, Mize
During this Webinar presented by leading Industry experts, you will learn about:
- The strategic role & value of installed base in driving aftermarket revenue
- Building customer loyalty and sensational customer experience through great service
- Enabling service revenue growth
- Service as the first line of defense against industry/market disruption
- Platform to grow revenues from service contracts, parts, repair, maintenance, and digital services
All qualified attendees will receive a digital copy of the book compliments of Mize.
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