IFS reports that manufacturers which offer aftermarket service are 24 percent more likely to report a profit than those which offer reactive service work.
The old way of selling products has changed for consumer and enterprise manufacturers. Even though most still sell new equipment, some now offer aftermarket services, like maintenance, upgrades, and support, which keeps the relationship between the seller and the client going for years after the first agreement.
According to enterprise software company IFS, manufacturers that offer aftermarket service – also known as servitization – are 24 percent more likely to report a profit than those which offer reactive service work.
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Over 35 percent of responders to the IFS study did not offer any aftermarket services, 19 percent offered both, 31 percent sold some forms of aftermarket repairs, while only four percent offered a fully servitized model.
“The fully servitized model, where a manufacturer may deliver a piece of equipment as a service, charging based on usage or through revenue sharing with their customer, requires a high degree of technological sophistication,” IFS Senior Evangelist, Tom DeVroy said.
“But even companies selling annual maintenance contracts or break-fix repair can benefit from integrating Internet of Things (IoT) data streams with their field service management software to improve responsiveness, automate the dispatch of technicians based on conditions of the product or just to gain an understanding of how their customer is using their products so they can sell to them more effectively.”
Fully servitized models include power-by-the-hour and fee-for-usage, which tie the seller directly with the customer. Instead of simply selling the product and working on the next update, the seller is focused on ensuring the customer remains on board, by offering round the clock service for the product.