For manufacturers the smart way of making more money is through service.
Indeed, the days of competing on product innovation alone are long gone.
When Apple, one of the best product companies on the planet, announced in 2016 that it makes more money from services than from selling Macs, people began to take note.
Even the coolest products become commoditised in the end. Today in 2020, Apple continues to lead the way in increasing revenues from services.
Manufacturers may not be able to replicate the services that Apple offers. However, they can enhance their own services.
If you are a manufacturer, you most definitely should take the following lesson from Apple’s success:
The opportunity for differentiation and future growth comes increasingly from service
For some manufacturers the transition from products to services may not be easy.
You may even have to turn your conventional wisdom on its head. This is especially so if you currently operate a pure B2B model.
Not only will you have to develop a direct to consumer channel. You may also have to transform your product-led company into a service-centric business.
To make more money with service there are 3 key changes to implement:
1. Move downstream and engage directly with your end users
Manufacturers are better placed than ever before to do this. What’s more, consumers are keen to connect to the manufacturers behind the brands that they buy.
In a service-driven organisation delivering the best possible customer experience over the entire product lifecycle becomes your overarching measure of success.
Reaching out to your customers at all potential touch points during the ownership cycle becomes an important factor in building lasting relationships.
You can also monetise these relationships over time. For instance, by selling add-ons, consumables and related services as well as the eventual replacement of the product itself.
The key technological enablers for consumer engagement include investments in CRM, field service management software and IoT.
Leveraging such technology enables you to integrate service KPIs and customer experience data. By feeding this data back into your R&D and design teams you can also drive improvements to the usability of your products.
However, your most fundamental challenge in moving from a pure B2B or B2B2C model to dealing directly with consumers may be to break down internal silos.
Naturally, the customer should experience no disconnects between different departments within your company.
Indeed, the customer must be at the heart of everything you do. This means that:
The voice of the customer must be heard right across your organisation.
Innovation in manufacturers service must be given equal priority to product development.
2. Design and manufacture your products with service in mind
With product margins under pressure, manufacturers have relentlessly reduced production costs. Sometimes this has resulted in the unintended consequence that service has become increasingly expensive to provide.
In a world where you are looking to make money from maintaining and upgrading your products, designing for serviceability takes on renewed importance.
Increasingly, you can collect data from the equipment itself, from your field service engineers or from information obtained directly from your customer.
This data helps you to enhance existing products. Likewise, you can use it to redesign new products to minimise the cost of service interventions.
The Internet of things, mobile field technology and consumer-facing apps also enable manufacturers to leverage your privileged position as “product experts” to provide market leading aftersales support.
Use your manufacturers service to humanise your brand
Service can make or break a brand. A manufacturer without a visible service team is like a brand with an invisible face.
Manufacturers service enables you to interact directly with your customers, listen to their changing demands and help them to maximise the benefits that they derive from your products.
It is also a powerful way to reinforce your carefully crafted brand messages. Great service gets your customers talking positively on and off line about their experience with your company.
“People do business with people, not with businesses”
And critically people do business with people they know, like and trust.
Service is a people business where your contact centre advisor becomes the voice of your brand. Moreover, your field technician is the visible face of your brand, welcomed onto company premises or into consumer’s homes.
Finally, your social media team invites your customers to actively judge the value of your brand through the service you deliver.
Get this right and you receive positive reviews and powerful brand advocacy.
Manufacturers service makes the difference and makes you more money in the long run
Transforming from a purely product-led business to a more service-driven organisation is not an easy journey.
It requires investments in technology to provide information in real time to customer facing teams.
Additionally, you must support your teams through training and coaching to enable them to drive the right outcomes for maximum customer lifetime value.
None of this happens overnight or without cost. However, in the long run you will achieve significant benefits because:
Service differentiation is generally more difficult to replicate than product differentiation
Apple are not the first manufacturer to focus on services for growth and they certainly won’t be the last
This article, originally published in July 2016, has been rewritten in March 2020.
For related information on how to increase your service profitability please download our free guide.
For advice and support to help you to develop your manufacturers service please contact us