3 Ways Smart Manufacturers Make More Money with Service

4th July 2016Change Management

For manufacturers the days of competing on product innovation alone are long gone.

When Apple, one of the best product companies on the planet, announces that it makes more money from services than from selling Macs, you have to heed the key message.

As even the coolest products become commoditised, the opportunity for differentiation and future growth comes increasingly from services.

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 where your relationships are with intermediaries such as retailers and you measure your success in terms of volume, mix and margin of products sold.

How do you transform your product-led company into a service-centric business?

I believe that there are 3 key changes to make:

Move downstream and engage directly with your end users

Image of engineer in a consumer's home giving advice on installing digital tv equipment

Manufacturers are better placed than ever before to do this and consumers are keen to connect to the OEM 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.

These relationships can be monetised over time by selling add-ons, consumables and 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 data integrations into design and engineering to improve the product and its serviceability.

More fundamentally, you must break down internal silos. The voice of the customer must be heard right across the company. Innovation in service must be given equal priority to product development.

Design and manufacture your products with service in mind

Tablet used in engineer service

With product margins under pressure, manufacturers have relentlessly reduced production costs, sometimes with 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 as well as redesign new products to maximise usage for the consumer and minimise the cost of service interventions.

The Internet of things, mobile field technology and consumer-facing apps enable manufacturers to leverage your privileged position as “product experts” to provide market leading after sales support.

Use service to humanise your brand

Call centre

Service can make or break a brand. A manufacturer without a visible service team is like a brand with an invisible face.

Interacting directly with consumers, listening to their changing demands and delivering high quality service to maximise the benefits that they derive from your products is a powerful way to reinforce your carefully crafted brand messages and get consumers 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 agent becomes the voice of your brand, your field technician the face of your brand and your social media team invites your customers to actively judge the value of your brand through the service you deliver.

Investing in service to support the brand requires technology to provide information in real time to customer facing teams and training to enable them to drive the right outcomes for maximum customer lifetime value.

In summary:

Transforming from a product-led business to a service-driven organisation is not an easy journey.

It is however an essential one for many manufacturers because:

  • Service often drives higher margins compared to products 1)
  • Service differentiation is generally more difficult to replicate than product differentiation
  • Customer experience is the key battleground for competitive advantage 2)

Apple are not the first manufacturer to focus on services for growth and they certainly won’t be the last 3)

1) Aberdeen Group 2013– State of Service Management Research

2) Gartner 2015 – The Customer Experience Battleground

3) Apple Q2 2016 financial results

For related information on this topic please read 5 reasons why after sales must be more than an afterthought

For advice and support to help you to develop your service business please contact Chris Dunn

Tel: +44(0)1487 843599

Email: cd@chrisdunnconsulting.co.uk